4-Star Stocks Poised to Pop: SAIC

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Based on the aggregated intelligence of 130,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, government defense contractor SAIC (NYSE: SAI) has earned a respected four-star ranking.

With that in mind, let's take a closer look at SAIC's business and see what CAPS investors are saying about the stock right now.

SAIC facts

Headquarters (founded)	San Diego, Calif. (1969)
Market Cap	$6.96 billion
Industry	Electronic components
TTM Revenue	$10.07 billion
Management	CEO Kenneth Dahlberg (since 2003) COO Lawrence Prior III (since 2007)
Return on Equity (average, last three years)	20.9%
Competitors	General Dynamics (NYSE: GD) Lockheed Martin (NYSE: LMT)
CAPS members bullish on SAI also bullish on	Apple (Nasdaq: AAPL) Chesapeake Energy (NYSE: CHK)
CAPS members bearish on SAI also bearish on	Boeing (NYSE: BA) General Motors (NYSE: GM)

Sources: Capital IQ, a division of Standard & Poor's, and Motley Fool CAPS. TTM = trailing 12 months.

Over on CAPS, fully 670 of the 709 members who have rated SAIC -- some 94% -- believe the stock will outperform the S&P 500 going forward. These bulls include All-Stars greenwave3 and ACMIP, both of whom are ranked in the top 4% of our community.

Last year, greenwave3 summed up the long-term bull case for our community: "As long as Americans keep paying taxes, these guys will continue to earn big government contracts. They are a 'preferred vendor' of sorts to the U.S. government and they receive contracts from the military, as well as other government agencies."

In a pitch from last week, ACMIP gets even more defensive:

[SAIC] is a capital light, consistently profitable, defensive business with a dominant competitive position, fortress-like balance sheet and solid long term growth prospects. It also happens to be significantly undervalued. Mgmt. has a long and distinguished paper trail, not to mention multiple levers at their disposal to build shareholder value over the next few years.

I think they can continue to grow sales, improve margins (through their various initiatives), sell off some hidden non-core assets (such as their real estate), or utilize their cash position to buyback stock, pay a dividend or reinvest for growth. This combination of internal operating improvements and value added capital allocation should lead to increasing operating and net margins as the company grows, which will eventually drive significant upside.

What do you think about SAIC, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. More than 130,000 investors are waiting to hear what you have to say. CAPS is 100% free, so simply click here to get started.