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3 Under-the-Radar Services Stocks to Buy

Booz Allen, Genpact and Towers all have some allure going forward

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Booz Allen Hamilton

boozallenhamilton 185 3 Under the Radar Services Stocks to BuyBooz Allen Hamilton (BAH) derives most of its revenue as a government contractor, supplying cybersecurity expertise to a wide swath of Federal agencies, including the Department of Defense, Treasury and EPA.

Fears that the sequester would hurt revenue led BAH to underperform the S&P 500 for most of the year — but those fears appear to have been overblown.

BAH easily topped Wall Street’s earnings forecast on Wednesday, helped by new contracts with the Pentagon, NASA and the Department of Homeland Security. Shares popped on the news, no doubt helped in part by a short squeeze. Nearly 11% of the float was sold short as of the end of April, according to data from S&P Capital IQ.

Regardless, the stock is now up 33% for the year to date, beating the broader market by a whopping 17 percentage points. That has the valuation looking a bit hot: BAH’s forward price-to-earnings is up to 12 vs. its own five-year average of 10.

But given a long-term growth rate of 11.2% and the 2.2% dividend, that multiple expansion seems more than warranted. BAH also is cheap relative to the broader market, which sports a forward P/E of 15 despite a growth forecast of less than 10%.


Article printed from InvestorPlace Media, http://investorplace.com/2013/05/3-under-the-radar-services-stocks-to-buy/.

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