The release of Rocky Balboa later this week brought back thoughts of the classic scene at the opening of Rocky III when Paulie unleashes his fury on the Rocky arcade game after a heavy night of inebriation and ends up in the can. While I certainly wouldn't condone such acts in real life, it was pretty entertaining, and in real life somebody does stand to benefit.

One of the potential beneficiaries would be the GEO Group (NYSE:GEO). The Florida-based corporation operates correctional, detention, and mental-health facilities for government agencies in the U.S. As of Jan. 1, 2006, the company had nearly 50,000 beds under its management.

After a fairly stagnant year for its stock price in 2005, this small cap has had a breakout year, with shares appreciating nearly 60%. For the nine months ended Sept. 30, the company reported that its pro forma income increased 152% to $21.7 million from $8.6 million during the same period in 2005. So what has brought this success? In short: an acquisition, high occupancy rates, and new contracts.

GEO Group acquired Correctional Service Corp. in November of 2005. This acquisition alone added $88.2 million in revenues, or 14% of total revenue, for GEO Group for the nine months ended Sept. 30. In terms of occupancy, the company maintained a 97% average rate at its U.S. correction and detention facilities, only slightly lower than the 99% rate it had for the first nine months of 2005.

A major development that helped GEO Group maintain strong occupancy rates is the federal government's Secure Border Initiative. During its fiscal 2006, Immigration and Customs Enforcement (ICE) set records for enforcement activity as it increased its detention bed space by almost 30% and ended its long-standing practice of "catch and release" along the southern border of the U.S. What kind of impact did that policy change have on GEO Group? In August, it increased the capacity of its South Texas Detention Complex by 87% to 1,904 from 1,020 inmates to accommodate the demand.

As for new work, the company won contracts to manage facilities in Indiana and the U.K., which provided additional revenues of $8.9 million and $3.3 million, respectively, for the first nine months of 2006. GEO Group's mental health/residential treatment business grew its revenues by 107% during the first three quarters of 2006 with new contracts leading to residential treatment revenue that increased to $50.2 million from $24.2 million in the first nine months of 2005.

There are risk factors. The company has a significant amount of debt and carries a rather high debt-to-equity ratio of 2.01. GEO Group also highly relies on its contracts with federal and other government agencies for its primary source of revenue. While current prison population trends have been favorable for business, a reversing trend could be detrimental.

For the time being, the outlook appears to be favorable for this stock; probably moreso than the outlook for Paulie when Sly picked him up from jail. The company is maintaining its full-year guidance for revenue growth of 50% to 54% and has earned the respect of money managers. GEO Group is a top-25 holding of the Brazos Micro Cap (FUND:BJMIX) fund. The fund's lead manager, Stephen Alloco, is big on prison stocks, with Corrections Corp. of America (NYSE:CXW) being the top holding of his Brazos Small Cap (FUND:BJSCX) fund.

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Fool contributor Billy Fisher does not own shares of any of the companies mentioned.