John Leonard, CFA
Special situations, micro-cap, contrarian, CFA

Bullish Outlook For VSE Corp Still Intact Despite Recent Challenges

Key takeaways

    VSE Corp. (NASDAQ:VSEC) trades at a mid single-digit multiple as the recent expiration of a key government contract and general decline in revenue over the past several years due to the winding down of military involvement in Iraq and Afghanistan caused investors to question the long term growth outlook. However, work quickly resumed on this key contract after the award of three new task orders. Moreover, operating income is higher despite significantly less revenue due to a shift to more profitable contract work. Furthermore, the growing free cash flow (yield of 19%) is expected to pay down acquisition-related debt at an accelerated pace and provides greater flexibility to reward shareholders through further dividend increases or another ...
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