Government IT firms see a rise in value

Market valuations for publicly traded government IT companies rose an average of 17 percent over the last six months, according to Input Inc., a Reston, Va.-based IT market research firm.

"Compared to an increase of 11 percent in the S&P 500 Index since the end of May, valuation ratio data for the sampling of government IT firms shows a trend of outperforming the market in general," said David Heinemann, head of strategic advisory services at Input.

He attributed the government IT market's performance, in part, to adoption of new technologies.

"The government IT sector is moving to the forefront in funding and using new technologies," Heinemann said. "Complex integrations, use of photonics and sensors in a variety of applications, and security and simulation applications are all areas of interest for the federal government that will translate to commercial applications over the next few years."

Although the 17 percent rise in valuations was impressive, Heinemann said the IT component of the S&P 500 rose 24 percent during the same period, indicating that valuations in the government IT market were lagging behind the overall IT sector.

Input's conclusions were based on an analysis of the enterprise value to revenue ratio (EV/R) of 17 public government IT firms. The researcher also looked at the enterprise value to net income ratio (EV/NI) of the same 17 companies and found that it rose an average of 21 percent. Input's previous analysis was in May 2003.

"As the whole IT sector continues to gain momentum, we expect the government-focused IT firms to move ahead in value as well," said Heinemann.

The 17 government IT companies that Input analyzed, along with their rankings in Washington Technology's 2003 Top 100 list, which measures federal contracting revenue, are: American Management Systems Inc. (46), Anteon International Corp. (14), CACI International Inc. (19), Computer Sciences Corp. (5), DigitalNet Inc. (35), Dynamics Research Corp. (53), GTSI Corp. (17), Halifax Corp. (NR), Integral Systems Inc. (NR), L-3 Communications Corp. (12), ManTech International Corp. (36), Maximus Inc. (NR), MTC Technologies Inc. (96), PEC Solutions Inc. (42), Perot Systems Corp. (56), SI International Inc. (83) and SRA International Inc. (32).