ManTech International Corp VAMANT83,60 $
Today we have a moderately speculative idea with a conservative touch: take shares of military contractor ManTech International (NASDAQ: MANT) because, that it is being prepared to buy.
Growth potential and validity: 14,5% during 16 months excluding dividends; 9% per annum over the next 13 years including dividends.
Why stocks can go up: because the company will be bought soon.
How do we act: we take shares now by 84,56 $.
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
No guarantees
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
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What the company makes money on
I already had a successful investment idea for this company. MANT serves the IT side of US government life with a focus on the defense industry.
MANT develops applications, ensures compliance with cybersecurity regulations, trains specialists, acts as a sysadmin, collects and analyzes data and so on.
99% the company's revenues directly or through subcontracts are provided by the US government.
The exact share of different types of customers was not indicated in the report, there is no information on segments and other details there either. From the MANT presentation I can guess, that the company's revenue structure looks something like this:
- Intelligence agencies - 46%.
- military departments - 40%.
- Civilian departments 13%.
- Other customers - 1%. Maybe, these are commercial structures, maybe, departments of other countries.
However, upon closer examination, it turns out, that civilian departments are the same military, or scouts, or someone next to them: State Department, aviation research, military healthcare system, etc..
By and large, nothing has changed in the structure of the company's business over the past two years since the first investment idea.
Arguments in favor of the company
stable. The main customer of the company is the US government, which makes it somewhat more stable, let not on 100%. This can attract a lot of investors to its shares..
Promising. The combination of war and IT is an extremely promising thing. This should already lead investors into shares purely on speculative grounds.. But there is also reason to believe, that everything will be fine for the MANT business.
The US military budget is the largest in the world., and Americans are always restless, which in itself generates demand for MANT services. Events in Eastern Europe showed, that the main advantage of the Americans is high technology and control over it. In the "open field to measure the strength of the heroic" with a large European army, they do not risk, and if they risk, then on a very, very limited scale - at the level of battles of small groups of special forces. That's why, it seems to me, soon in the US the military will increase spending on "brains", which will greatly benefit MANT.
Aggressive implementation of the progressive left-liberal agenda will help purge the US military and intelligence structures of smart people, who will go to the private sector. Under these conditions, in the government, not the “smartest” will be responsible for communicating with MANT, and those, who is left". Under such conditions, MANT will be able to fish in troubled waters and impose an inflated price on customers..
Inexpensive. MANT is inexpensive: P / S 1,35, P / E 25.26 i, finally, capitalization of only 3.45 billion.
Probably, buy. The main argument in favor of the company has already been voiced in the latest batch of investment news.: there was news about, that company founder George Pedersen plans to sell his majority stake. At least two possible buyers of the company are now known:
- R&D company KBR;
- Carlyle Group Investment Fund (CG).
They have different incentives to buy MANT. And financial opportunities are also very different.. KBR, I guess, has the most motivation: it has a low total margin, on the verge of negative, in 5 times lower, than MANT.
CG is the opposite.: her total margin is almost 6 times higher, than MANT. But she has so much free money, what can she buy at least 4 the same companies, like MANT.
I think, that the lack of money in which case does not interfere with KBR: she may well find a loan or even buy MANT with CG.
But our preferred option would be, in which KBR and CG will compete with each other, what will contribute to the pumping of the company's shares. MANT price is now below all-time highs: in January 2021 they asked for shares 101 $. Considering all the strengths of this business, I doubt that, that they will buy it for an amount much less than this bar. Although this possibility cannot be completely ruled out.
Dividends. The company pays 1,64 $ per share per year, what gives unashamed 1,93% per annum. It's not crazy big money., but in combination with all the factors described, it will attract a lot of fans to the company's shares "so that the money does not lie idle".
Furthermore, if the company is not sold, then dividends can increase. I used to be afraid, that the founder-owner of MANT Pedersen can take some action, aimed at preserving the enterprise, but not in the interests of shareholders. But the news about the impending sale of his stake means, what matters most to him is money. So,, dividends can increase at least one and a half times, if the sale does not go through.
What can get in the way
They will not buy. If the company is not bought, then stocks can drop a lot and we will have to become long-term investors. It's not terrible in and of itself.: the company's business is promising, as we have already figured out. But still I would like a quick and easy profit. By the way,, we already had a similar case with Aerojet Rocketdyne.
Also, if the company is not bought, then its risks and problems will become ours. Here are the highlights, which in this case must be taken into account.
Will not buy due to "accounting". The sum of all debts of the company is 964.145 million, of which during the year you need to repay 377.228 million. MANT has enough money to close urgent debts: 53,374 million on accounts and 476.035 million debts of counterparties. But, Considering, that rates will rise soon, and loans are going up, it's a little stressful. It can also affect the company's ability to pay and raise dividends..
Will not buy due to "ITflation". America has a severe IT talent shortage. It will be difficult for a small company like MANT to compete for specialists in the labor market with such giants., like Microsoft, Google, Intel. So I would be afraid, that the company's personnel costs will begin to have a serious impact on margins.
They will buy, but not like that, how to. There is a possibility that, that Pedersen would sell the company for a price, close to current, and we won't make much money.
What's the bottom line?
Shares can be taken now by 84,56 $. And then there are two options for the development of events:
- the company will be bought at a price 97 $. It's not overpriced or outrageous.. Furthermore, stocks may well reach this level, starting from the fundamental properties of this business. Well, or in the course of trading for them between different possible buyers, the shares will reach this price. Think, that everything will be decided in the next 16 Months;
- if the company is not bought, then hold the shares following 13 years in sorrow and joy. If last time you took them for a long time, now you can buy. This, certainly, somewhat less preferred, than buying a company soon. But still, the business is very interesting and in itself.
