At about the same time as cross-country rival SAIC (NYSE:SAI) was scaring investors with news of declining margins and middling sales growth, government contractor DynCorp (NYSE:DCP) wowed the Street Wednesday evening, sending its shares up a startling 23% on news of strong earnings and raised guidance. (However, the shares have since given back 6% of those gains as investors harvested some of their windfall.)

Despite reporting sales gains just one-tenth the size of SAIC's for the quarter -- 0.6% -- DynCorp managed to transform these essentially flat sales into a near-doubling of net profit, with earnings per share surging 83% year over year.

The year that was
One other difference between the two contractors: SAIC was reporting its first quarter of fiscal 2008. DynCorp was wrapping up fiscal 2007. This is an irrelevant distinction for the most part, but it does make it easier for us to focus on the long-term performance of the latter company. So let's examine not just the fabulous fourth quarter, but also the none-too-shabby full fiscal year it turned in last week.

In that regard:

  • DynCorp booked $2.08 billion in revenue last year (trivia: this is just $14 million more than SAIC booked in the last quarter alone), a 6% increase over fiscal 2006.
  • Operating profit grew 12%, thanks in large part to operating margins rising 30 basis points to 5.5%.
  • Net profit nearly quadrupled to $27 million.
  • Meanwhile, dilution from the firm's IPO limited per-share profits growth to "only" 113% ($0.49 per share).

As we've previously discussed, backlog is an important metric when analyzing government contractors. Knowing current backlog, we can get a good feel for future revenue and can make an educated guess at profits. So at first glance, investors should be thrilled to see that backlog more than doubled to $6.1 billion last year ... maybe.

Yes, just maybe. Because nearly all of that increase in backlog consisted of a single translation and interpretation contract that DynCorp won away from rival contractor L-3 Communications (NYSE:LLL) last year. L-3 protested DynCorp's win in December 2006 and was initially successful. While the U.S. Army continues to indicate a preference for DynCorp to fulfill the contract, the ultimate winner in this dispute remains unknown -- meaning that $3.3 billion worth of DynCorp's "backlog" could disappear at any moment.

Learn more about the "INSCOM" contract dispute in:

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Fool contributor Rich Smith does not own shares of any company named above. The Fool has a disclosure policy.