NEW YORK ( TheStreet) -- A Federal Information Security Market report shows that demand for vendor-furnished information security products and services by the U.S. federal government will increase from $9.2 billion in 2011 to $14 billion in 2016, at a compound annual growth rate of 8.8%.The proposed $553 billion fiscal 2012 budget for the Department of Defense is $22 billion higher than the 2010 appropriation. This calls for spending $2.3 billion in new and ongoing cyber security research and development at the DoD and improving existing cyber security capabilities. The budget also provides $119 million to support the operational capability of Cyber Command, established in 2010 to direct the operations and defense of specific DoD information networks. The following stocks could gain from 9% to 46%. They have average buy ratings of 54% and hold ratings of 44%, according to analysts polled by Bloomberg. The stocks are listed in ascending order of upside potential.
6. OSI Systems ( OSIS) manufactures and sells specialized electronic systems and components used in aerospace, defense, health care and security. Of the six analysts covering the stock, four recommend a buy and two affirm a hold. The stock's average 12-month price target is $49, about 8.9% higher than the current market price, according to analysts polled by Bloomberg. The company reported total revenue of $161.32 million for its 2012 first quarter, up 26% from $128.45 million in the same period the previous year. Year-over-year revenue growth reported in the security, health care, and optoelectronics and manufacturing divisions was 42%, 1% and 27%, respectively. Net income grew 40.4%, to $4.76 million, from $3.39 million in the same quarter the prior year. Total revenue for fiscal 2012 is likely to increase by 13% to 16%, year over year. Diluted earnings per share are expected up 23% to 30%, excluding the impact of restructuring and other charges. A Southern Louisiana hospital recently placed a $1.8 million order for OSI's patient monitoring solution and ICS G2 enterprise connectivity software. In addition, the company's security division bagged a $10 million order from Eastern European customers for cargo and vehicle inspection systems. Also, the U.S. Department of Homeland Security's Domestic Nuclear Detection Office has awarded it several exploratory research program contracts worth $7 million.