Leidos
LDOS
$130.60
+10.01%
Leidos Holdings, Inc. is a technology, engineering, and science company that provides services and solutions in defense, intelligence, civil, and health markets, primarily to U.S. government agencies. As a leading player in the government IT and defense services sector, Leidos is recognized for its deep domain expertise and long-standing relationships with key customers like the DoD and the Intelligence Community. The current investor narrative centers on the company's recent record profits, which were overshadowed by a revenue miss and cautious guidance, leading to a sharp sell-off in February 2026. Additionally, the broader defense industry is facing disruption from private autonomous vessel startups, which could challenge traditional contractors like Leidos, while the company's stock has been under pressure amid a government shutdown and weak outlook.…
LDOS
Leidos
$130.60
Related headlines
Investment Opinion: Should I buy LDOS Today?
Based on the analysis, Leidos is rated a Hold. The consensus is a Buy with an average target of $150.67, implying 30.3% upside, but the recent revenue miss and cautious guidance temper enthusiasm. The stock trades at a forward PE of 8.82x, a 26% discount to the industry average of 22x, and offers a dividend yield of 0.87%. However, revenue growth is decelerating, and margins are under pressure, which could justify the discount. The rating would upgrade to Buy if revenue growth reaccelerates above 5% and margins stabilize, or downgrade to Sell if the government shutdown persists and backlog declines. Overall, the stock appears fairly valued relative to its history, but the low forward PE suggests the market is pricing in a recovery that has yet to materialize.
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LDOS 12-Month Price Forecast
The AI assessment is neutral with medium confidence. Leidos offers a compelling valuation with a forward PE of 8.82x and strong cash generation, but growth is slowing and margins are under pressure. The stock's low beta provides downside protection, but the lack of catalysts may limit upside. If revenue growth reaccelerates above 5% and margins stabilize, the stance would upgrade to bullish; conversely, if the government shutdown persists and margins deteriorate further, it would downgrade to bearish.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Leidos's 12-month outlook, with a consensus price target around $150.67 and implied upside of +15.4% versus the current price.
Average Target
$150.67
0 analysts
Implied Upside
+15.4%
vs. current price
Analyst Count
—
covering this stock
Price Range
$110 - $225
Analyst target range
Leidos is covered by 15 analysts, with a consensus recommendation of 'Buy' and a mean recommendation score of 2.35 (where 1 is Strong Buy and 5 is Sell). The average price target is $150.67, implying an upside of 30.3% from the current price of $115.60. The target range is wide, from a low of $110.00 to a high of $225.00, indicating high uncertainty about the company's future performance. The high target of $225 assumes a strong recovery in defense spending and successful execution of its growth strategy, while the low target of $110 reflects concerns about continued margin pressure and potential government budget cuts. Recent ratings actions show a mix of holds and buys, with B of A Securities downgrading from Buy to Neutral in June, and Jefferies downgrading from Buy to Hold in June, suggesting some caution among analysts.
Bulls vs Bears: LDOS Investment Factors
Leidos presents a mixed picture: strong cash generation, high ROE, and a low forward PE suggest value, but revenue deceleration, margin compression, and high debt raise concerns. The bear case is currently stronger due to the recent revenue miss and cautious guidance, which have driven the stock down 27.6% over the past year. The most critical tension is whether the company can reignite growth and stabilize margins, as this will determine if the low forward PE is justified or a value trap. If growth resumes and margins hold, the stock could re-rate higher; otherwise, further downside is possible.
Bullish
- Strong Free Cash Flow Generation: Leidos generated $1.859 billion in free cash flow over the trailing twelve months, providing ample coverage for its debt obligations and supporting continued dividend payments and share buybacks. This robust cash generation underpins financial flexibility and shareholder returns.
- Attractive Forward Valuation: The forward PE ratio of 8.82x is significantly below the trailing PE of 16.35x, implying the market expects substantial earnings growth. With an estimated EPS of $14.40 for the next fiscal year, the stock appears undervalued relative to its earnings potential.
- High ROE and Profitability: Leidos boasts a return on equity of 29.6%, well above industry norms, indicating efficient use of equity capital. Net margin of 7.45% in Q1 2026, though slightly compressed, remains healthy and supports ongoing profitability.
- Defensive Business Model: With a beta of 0.547, Leidos is significantly less volatile than the broader market, making it a defensive play. Its long-term contracts with U.S. government agencies provide revenue stability and visibility, which is attractive during economic uncertainty.
Bearish
- Revenue Growth Deceleration: Q1 2026 revenue grew only 3.65% YoY, down from 5.1% in Q4 2025 and 6.7% in Q3 2025. This deceleration, coupled with a revenue miss in the latest quarter, signals weakening demand and execution challenges.
- Margin Compression: Net margin fell to 7.45% in Q1 from 7.96% in Q4 and 8.21% in Q3, while operating margin declined to 11.5% from 11.2% in Q4. Rising operating expenses are eroding profitability, and this trend may continue.
- High Debt Levels: The debt-to-equity ratio of 1.21 is relatively high, indicating significant leverage. While free cash flow covers debt service, a prolonged downturn or rising interest rates could strain the balance sheet.
- Disruption from Autonomous Vessels: Private startups like Saronic are developing robotic warships, potentially disrupting traditional defense contractors like Leidos. The Navy's pivot to faster, cheaper autonomous vessels could reduce demand for Leidos' legacy offerings.
LDOS Technical Analysis
Leidos has been in a sustained downtrend over the past year, with the stock price declining 27.6% from a year ago. Currently trading at $115.60, the stock is near the lower end of its 52-week range, sitting at approximately 15% above the 52-week low of $98.86 and 44% below the 52-week high of $205.77. This positioning near the lows suggests a bearish sentiment, but also potential value opportunity if the company's fundamentals stabilize. The stock's beta of 0.547 indicates it is significantly less volatile than the broader market, which may appeal to risk-averse investors but also reflects its defensive nature.
Beta
0.55
0.55x market volatility
Max Drawdown
-49.9%
Largest decline past year
52-Week Range
$99-$206
Price range past year
Annual Return
-18.9%
Cumulative gain past year
| Period | LDOS Return | S&P 500 |
|---|---|---|
| 1m | +20.0% | +3.6% |
| 3m | -3.2% | +5.1% |
| 6m | -29.8% | +13.8% |
| 1y | -18.9% | +22.2% |
| ytd | -28.8% | +13.1% |
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LDOS Fundamental Analysis
Leidos reported revenue of $4.4 billion in Q1 2026, up 3.65% year-over-year, but this was a deceleration from the 5.1% growth seen in Q4 2025 and the 6.7% growth in Q3 2025. The company's net income for Q1 was $328 million, with a net margin of 7.45%, down from 7.96% in Q4 and 8.21% in Q3, indicating slight margin compression. Gross margin improved to 17.3% in Q1 from 16.0% in Q4, but operating margin fell to 11.5% from 11.2% in Q4, reflecting higher operating expenses. The company's balance sheet shows a debt-to-equity ratio of 1.21, which is relatively high, but it generated $1.859 billion in free cash flow over the trailing twelve months, providing ample coverage for its debt obligations. The current ratio of 1.70 indicates adequate liquidity, and the ROE of 29.6% is strong, reflecting efficient use of equity capital.
Quarterly Revenue
$4.4B
2026-04
Revenue YoY Growth
+3.6%
YoY Comparison
Gross Margin
17.3%
Latest Quarter
Free Cash Flow
$1.9B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is LDOS Overvalued?
Given Leidos' positive net income, the PE ratio is the primary valuation metric. The trailing PE is 16.35x, while the forward PE is 8.82x, indicating that the market expects significant earnings growth in the next year. This gap suggests that the market is pricing in a recovery in earnings, which is supported by the estimated EPS of $14.40 for the next fiscal year. Compared to the industry average PE of 22x, Leidos trades at a 26% discount, which may be justified by its lower growth prospects and the recent revenue miss. Historically, Leidos' PE has ranged from 11.9x to 21.5x over the past two years, and the current trailing PE of 16.35x is near the middle of that range, suggesting the stock is fairly valued relative to its own history.
PE
16.4x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 12x~21x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
12.1x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks are significant. Leidos carries a debt-to-equity ratio of 1.21, which is elevated, and while free cash flow of $1.859 billion covers interest expenses, a rise in rates or a downturn could strain the balance sheet. Revenue growth decelerated to 3.65% YoY in Q1 2026, down from 6.7% in Q3 2025, and net margin compressed to 7.45% from 8.21% in Q3, indicating operational challenges. The company's reliance on U.S. government contracts exposes it to budget cycles and shutdowns, which can delay revenue recognition and pressure earnings.
FAQ
Key risks include: 1) Financial risk from high debt-to-equity of 1.21 and margin compression; 2) Competitive risk from autonomous vessel startups like Saronic disrupting traditional defense contracts; 3) Macro risk from government shutdowns and budget cuts; 4) Company-specific risk of revenue deceleration, with Q1 growth at 3.65% YoY. The most severe risk is a prolonged shutdown leading to contract delays and further earnings downgrades.
The 12-month forecast is mixed. The bull case (25% probability) targets $150-$225, driven by accelerated defense spending and contract wins. The base case (50% probability) targets $130-$160, aligning with the analyst average of $150.67. The bear case (25% probability) targets $98-$115, if the shutdown persists and margins compress. The most likely scenario is the base case, assuming moderate growth and stable margins.
Leidos trades at a trailing PE of 16.35x and a forward PE of 8.82x, which is a 26% discount to the industry average of 22x. Historically, its PE has ranged from 11.9x to 21.5x, so the current trailing PE is near the middle. The low forward PE suggests the market expects significant earnings growth, but the recent revenue miss may justify the discount. Overall, the stock appears fairly valued relative to its own history, but undervalued relative to peers if growth resumes.
Leidos is a good buy for investors seeking a defensive, income-generating stock with a low beta and strong cash flow. The consensus rating is Buy with an average target of $150.67, implying 30.3% upside. However, the recent revenue miss and cautious guidance introduce near-term risk. The stock is suitable for long-term investors who can withstand volatility, but those with a shorter horizon may want to wait for signs of growth stabilization.
Leidos is more suitable for long-term investment due to its defensive nature, low beta of 0.547, and stable government contracts. The stock has high earnings visibility and pays a dividend, but near-term volatility from budget uncertainty makes it less ideal for short-term trading. A minimum holding period of 3-5 years is recommended to ride out cyclical defense spending fluctuations and capture potential re-rating.