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Very few industries have more uncertainty than the government contracting sector. As we approach the "fiscal cliff" at the end of the year, huge cutbacks await the defense sector and other parts of the contracting universe could also come under increasing pressure as well. That being said, some stocks in the space have gotten much too cheap. Here is one that has dirt cheap valuations, technical support and has had some insider buying is VSE Corporation (NASDAQ:VSEC).

"VSE Corporation focuses on providing sustainment services for the legacy systems and equipment of the U.S. Department of Defense; and professional services to the DoD and federal civilian agencies in the United States." (Business description from Yahoo Finance)

6 reasons VSEC is undervalued at under $24 a share:

  1. Numerous insiders have bought shares totaling approximately $250K in the last two months.
  2. VSEC is selling at the very bottom of its five year valuation range based on P/B, P/E, P/S and P/CF.
  3. The stock has a five year projected PEG of under 1 (.62). VSE Corp. has grown both revenues and earnings at better than a 10% annual clip over the past five years.
  4. The stock is cheap at just 20% of annual revenues and only 82% of book value. It also had its first "beat" in the last six quarters with its last earnings report.
  5. VSEC is selling for just 5.3 times forward earnings, three times operating cash flow and also yields 1.3%.
  6. The stock has solid, long term technical support at just under current price levels (See Chart)

(click to enlarge)

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in VSEC over the next 72 hours.

Source: Technical Support And Recent Insider Buying Bode Well For This Stock