- The Washington Times - Tuesday, March 4, 2003

Shares of SRA International Inc., a Fairfax information-technology company serving the federal government, have fallen back to their price of six months ago despite SRA's winning another lucrative government contract last week.
SRA yesterday announced it had won a $105 million contract for continuing its work at the General Accounting Office. It's the non-defense direction Ernst Volgenau, president and CEO, is hoping to grow in coming years.
"Obviously, right now the Defense Department and Homeland Security Department are going to be growing at a faster rate, and our divisions for those agencies will grow at higher rates as well," Mr. Volgenau said.
The company also is working to diversify contract orders in civilian government agencies, such as the Transportation Department, one of the larger spenders on information technology, according to a recent survey by Input, a Chantilly information-technology services group.
The federal government spent more than $60 billion on information technology in 2002, the survey said. Such business will continue to increase for the next several years, said Cynthia Houlton, a senior research analyst at RBC Capital Markets.
"The [percentage growth in] federal spending in the IT sector continues to be in the double digits, and we see SRA as a unique competitor in this robust spending environment," Ms. Houlton said, rating the company as outperforming the market.
Other analysts warn that the company's stock performance hasn't warranted a "green-light" buy for investors. Mark Jordan, vice president at A.G. Edwards & Sons Inc., has advised investors to hold off from conducting significant transactions in the near future.
Mr. Jordan said the stock was higher than he usually recommends for his clients. It closed yesterday at $24.90 on the New York Stock Exchange, down from $25.54 Friday and 3 cents lower than its price six months earlier.
"The cost of transactions makes it worthwhile for investors to stay in the stock for the time being," Mr. Jordan said.
Adam Frisch, executive director for equity research at UBS Warburg, also voiced concern about SRA. While net income per share is expected to grow 22 percent this year, Mr. Frisch said the growth doesn't change his neutral rating of the stock.
"It's a fair market evaluation that has no negative connotation to the company's growth," Mr. Frisch said.
The company's profits jumped in the second fiscal quarter ended Dec. 31 to $9 million (38 cents per diluted share) from $1.3 million (8 cents) a year earlier. Diluted earnings per share reflect the value of convertible warrants and stock options.
Revenues for the year ended June 30 was forecasted to be between $439 million and $451 million, while net income per share was supposed to reach 95 cents to 99 cents.
Second-quarter sales rose 27 percent to $105.3 million from $83 million the previous year. Part of the growth came from new orders and the sale of commercial divisions, such as Assentor, a commercial security-technology firm, for $2.8 million.
"SRA has been able to better focus … work with the federal government by getting rid of these commercial divisions," Mr. Volgenau said.
Ms. Houlton added SRA also has increased income from the federal government with the acquisition of more specialty-service companies such as Adroit Systems Inc., an intelligence, surveillance and reconnaissance company in Alexandria that provides support to the Defense Department.

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