VSE Corporation Still Undervalued: Why Hasn't It Bounced Higher?

VSE Corp (VSEC) reported earnings in April and on the 1st of May announced a 2 for 1 stock split, effective June 28. Trading at around $50 before earnings (at $45 two weeks before) the stock closed last Friday at $67.30. It was all due to the phenomenal revenue and earnings growth.

What we don't get is why this stock didn't bounce immediately to $75. If you buy the growth story, then this stock should be at $75. If you don't buy it, then this stock should not be increasing gradually at all. Obviously the trend is real and the company has a proven growth pattern, including the ability to team up with others for larger contracts. Perhaps the market is signaling that VSEC growth rate is poised to contract to 7/8% over the next five years. Otherwise we just don't get the markets laidback stance on this one.

By the way, we still maintain our 33% average annual growth estimate for the next five years (FY2008 - FY2012). This one is still a buy at $67.

VSEC 1-yr chart

Disclosure: No conflicts.

Comments

[CrossProfit]

As of 10/23/2007 the 'quote media' chart used by Seeking Alpha does not reflect the 2 for 1 split from the end of June this year.

On a pre-split basis, stock was recommended at $67.30 now trading at $118 (~59x2). We would take half of the table above $120 ($60 split adjusted) as VSEC approaches fair full value and should it hit $67 take the other half off and re-enter at a lower price.

Time frame is through December 2007.

CrossProfit