Thursday, March 10, 2022
Vectrus (VEC)
Sell-off Overdone – Favorable Risk/Reward
Vectrus Inc is a U.S.-based company that provides services to the U.S. government. It operates as one segment and offer facility and logistics services and information technology and network communications services. The information technology and network communications capabilities consist of communications systems operations and maintenance, management and service support, systems installation and activation, system-of-systems engineering and software development, and mission support for the department of defense. The facility and logistics service include airfield management, ammunition management, civil engineering, communications, emergency services, life support activities, public works, security, transportation operations and others.
Joe Gomes, Senior Research Analyst, Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Sell-off Overdone. VEC shares are off approximately 21% since the announcement of the Vertex combination. We believe this reaction to be overdone, presenting investors a favorable risk/reward opportunity. Assuming 31.6 million shares outstanding after the combination and $1.1 billion of debt, at our $62 price target, the combined entity would trade at 10.8x 2021 pro forma adjusted EBITDA and 0.9x pro forma revenue, multiples still below its peer group.
Moody’s Upgrade? On Tuesday, Moody’s placed all ratings of Vertex on review for upgrade, stating “Moody’s recognizes the strategic rationale for the transaction, as the combined companies will enhance their technology and service capabilities, while increasing scale and expanding the bid pipeline.” Moody’s does point out integration risk, heightened by Vertex’s acquisition of the Raytheon businesses …
This research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
