DYNAMICS RESEARCH

DRCO

- Small cap ($125 million market cap);
- Valuation reasonable (11.3X of its 05EPS), not compelling though;
- Modest earning growth (10%-15%);
- Meaningful improvement of margins;
- Reasonable level of ROE (17% in 05);
- Manageable balance sheet;
- A number of contracts awards announced recently;
- Q4/05 seems in the bag;
- Management appears to be experienced and strong;


- Dependency on the defense industry (political uncertainty in the next few years);
- The stock seems to struggle and trending downward;