No. of Recommendations: 15
It does provide a necessary service.
No argument. But a firm can be in a necessary business and still be scummy about the way they do it.
I simply don't trust management. I doubt anyone would who's looked closely. Try to pick a year that they haven't paid a big settlement for overbilling or fraud or something in that vicinity--I believe they've averaged paying about $90 million a year in settlements for that in the last 14 years, and it just keeps happening. (for a sense of scale, that's not far from 1% of current market cap per year)
And financially I don't find it compelling. At the top line, it's the same business it was a decade ago. Revenues, cash flow, profits, whatever. Cash flow and earnings per share are up only because of massive buybacks. There is nothing at all wrong with that, but you have to be careful not to count the same money twice.
Cash flow from operations can be directed to buybacks, or to owners, but the same dollar can't go to two places. You can see it as a dead end cash cow with flat owner earnings, or you can see it as a no-owner-earnings firm with rising headline EPS with all that money going to buybacks. But you can't view it as a firm with rising owner earnings, because it isn't.
Jim
