I was stuck in yet another endless TSA line last week when something caught my eye that actually made the wait worthwhile.
Right there on the checkpoint screen was an ad for “zero-trust architecture” – the kind of phrase that sounds like marketing buzz until you realize the government is spending billions on it. Then, on the flight home, the guy next to me (clearly some flavor of three-letter agency) was reviewing slides about electronic warfare and gaps in current capabilities. Two random moments, one common thread: the defense sector is quietly in the middle of its biggest technology upgrade in decades.
That got me wondering – which companies are actually positioned to ride this wave while still passing a brutally strict investment filter? Not just “good story” stocks. I wanted real revenue acceleration, continued analyst confidence, price momentum, and preferably a valuation that hasn’t gone full meme-stock.
The Screen That Left Only One Defense Pure-Play Standing
I ran a pretty unforgiving set of criteria across the entire Russell 1000.
- Five-year revenue CAGR ≥ 6% (the S&P 500’s baseline)
- Five-year EPS CAGR ≥ 8%
- Current price above both 50-day and 200-day moving averages
- No deceleration in trailing-twelve-month revenue growth
- Next fiscal year consensus revenue growth still ≥ 6%
- No negative revenue estimate revisions in the past 90 days
Twenty names made the cut. Nineteen were the usual suspects in healthcare, industrials, or consumer. Only one was a genuine defense and intelligence technology company deeply embedded with U.S. government customers.
That company is CACI International (NYSE: CACI).
Who Is CACI and Why Haven’t You Heard the Hype?
In a world where every hot defense name seems to have a former PayPal mafia founder or daily memes, CACI has flown deliberately under the radar for fifty years. No flashy CEO tweets. No retail trader armies. Just steady, mission-critical work for the Defense Department, intelligence community, and increasingly civilian federal agencies.
Think of them as the ultimate “pick-and-shovel” play for the new era of great-power competition. While some peers sell hardware or platforms, CACI delivers the software, systems integration, and specialized expertise that make everything else work.
Seven Growth Drivers That Actually Matter
The company laid out seven priority markets in their latest October investor day, and every single one maps to budget lines that are growing faster than overall defense spending.
- Electronic Warfare – jamming, counter-jamming, spectrum dominance
- Signals Intelligence (SIGINT) – the art of listening to everyone else
- Space-based ISR – yes, satellites are now a contested domain
- Zero-Trust Cybersecurity – more on this in a minute
- 5G and Next-Gen Communications – secure networks for the battlefield
- Digital Transformation – modernizing creaky DoD IT systems
- Mission Software – the glue that ties multi-domain operations together
These aren’t slideware dreams. CACI is already inside the most sensitive programs, often as prime contractor or critical partner.
What “Zero-Trust” Really Means in Practice
Let’s pause on zero-trust because it’s everywhere yet still widely misunderstood.
The old model was “castle and moat” – build a big firewall, trust everything inside. The new reality? There is no “inside.” Every user, every device, every application has to prove it belongs every single time it wants access. It’s continuous verification in a world where breaches are assumed.
“Never trust, always verify.” That single sentence is now official DoD policy across classified and unclassified networks.
CACI isn’t just riding this trend – they’re helping write the playbooks. And with Executive Order 14028 and CISA’s deadlines looming, the spending pipeline here is multi-year and largely non-discretionary.
Numbers That Actually Hold Up
Here’s what the company guided for fiscal 2026 (ending June 2026):
- Revenue $9.2 – $9.4 billion → low-double-digit growth at the midpoint
- Adjusted EBITDA margin expansion
- Free cash flow growth > 15% annually (their three-year target)
- Record $34 billion total backlog
- Another $13 billion in bids expected to be submitted in the next two quarters – 75% for new business
That last point is worth repeating. Three-quarters of near-term pursuits are for work they don’t currently perform. In government contracting, that’s as close to “optionality” as you ever get.
And unlike some high-flyers trading at 12-15x sales, CACI sits around 1.9x sales and roughly 18x forward free cash flow. Reasonable? Almost boringly so for the growth profile.
The Options Angle Very Few Are Talking About
The stock closed around $590 recently. The January 570 put (44 days out) was bid at $15.10 when I last looked.
Do the math:
- $1,510 credit on a $57,000 notional commitment
- That’s 2.65% in 44 days
- Annualized → north of 22%
Even if you’re assigned at $570 net ($570 – $15.10), you lock in a 3.4% discount to spot plus the premium. Not heroic, but certainly equity-like return for what is still a growing, cash-flow-positive defense pure-play.
Personally, I require minimum 12% annualized on cash-secured put sales to compensate for the opportunity cost and assignment risk. This trade clears that bar by a mile.
Risks? Of Course There Are Always Risks
No investment is perfect. Budget continuing resolutions can delay awards. A major program recompete loss would sting. Execution missteps happen in large integration jobs.
But the beauty of CACI’s model is diversification – thousands of task orders across hundreds of programs. One loss rarely moves the needle more than low-single-digit percentages.
And with the DoD finally treating software and cyber as core warfighting capabilities (not just “IT”), the secular tailwinds look stronger than any cyclical headwind on the horizon.
The Bottom Line
In a market obsessed with the handful of usual suspects, CACI International stands out precisely because it doesn’t need hype to compound. It has the contracts, the capabilities, the backlog, and the financial targets that actually matter.
Whether you buy the shares outright or use options to collect premium while you wait, this is one defense technology name that still has plenty of runway left – and it’s doing it without the drama.
Sometimes the best opportunities are the ones that don’t trend on social media. Sometimes they’re just quietly executing while everyone else is looking the other way.
Right now, that describes CACI perfectly.
