Leidos
LDOS
$106.58
-0.41%
Leidos Holdings, Inc. is a technology, engineering, and science company that provides services and solutions to the defense, intelligence, civil, and health markets, primarily serving U.S. government agencies such as the DoD, DHS, and FAA. As a leading player in the information technology services industry, Leidos distinguishes itself through its deep expertise in national security and digital transformation, operating across four segments: National Security & Digital, Health & Civil, Commercial & International, and Defense Systems. The current investor narrative is dominated by concerns over revenue deceleration and cautious guidance, as highlighted by a recent earnings miss and a 6% stock decline, despite record profits. Additionally, the broader defense sector faces disruption from private companies like Saronic developing autonomous naval systems, adding uncertainty to Leidos's long-term growth trajectory.…
LDOS
Leidos
$106.58
Related headlines
Investment Opinion: Should I buy LDOS Today?
Rating: Hold. Leidos is a Hold based on the conflicting signals of cheap valuation and deteriorating fundamentals. The analyst consensus is mixed (Buy from Citigroup, Hold from Stifel), and the average target price of approximately $107 (implied by average EPS of $14.52 at 7.4x forward P/E) offers no upside from the current price of $107.02. The thesis is that the stock is fairly valued if earnings recover, but risky if they don't.
Supporting Evidence: The forward P/E of 8.14x is well below the trailing P/E of 16.35x, implying aggressive earnings growth expectations. Revenue declined 3.6% YoY in Q4 2025, but net margin improved to 8.5% from 6.5%, showing cost discipline. Free cash flow of $1.625 billion TTM provides a 6.7% FCF yield, which is attractive. However, the PEG ratio of 0.82x relies on analyst growth estimates that may be too optimistic given the revenue trend. The stock's PS ratio of 1.41x is below the industry average for IT services, but this discount is warranted by the revenue decline.
Risks & Conditions: This Hold would upgrade to Buy if revenue growth turns positive (e.g., Q1 2026 shows YoY growth) or if the stock falls below $95, offering a larger margin of safety. It would downgrade to Sell if revenue declines accelerate (e.g., below -5% YoY) or if the company cuts guidance. The biggest risks are the revenue trajectory and competitive disruption. Valuation verdict: Leidos is fairly valued relative to its near-term earnings power but overvalued relative to its declining revenue trend. The stock is not a clear bargain until growth resumes.
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LDOS 12-Month Price Forecast
Leidos is at a crossroads: its valuation is cheap on forward earnings, but the revenue decline and cautious guidance create significant uncertainty. The base case of flat revenue and stable earnings is most likely, offering limited upside from current levels. The bull case requires a catalyst like a major contract win, while the bear case could materialize if revenue deterioration continues. The wide dispersion in analyst estimates reflects this uncertainty. I would upgrade to bullish if Q1 2026 shows positive revenue growth, and downgrade to bearish if the company issues a negative pre-announcement.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Leidos's 12-month outlook, with a consensus price target around $138.55 and implied upside of +30.0% versus the current price.
Average Target
$138.55
9 analysts
Implied Upside
+30.0%
vs. current price
Analyst Count
9
covering this stock
Price Range
$85 - $139
Analyst target range
Leidos is covered by 9 analysts, with a consensus leaning bullish: ratings include Buy from Citigroup and B of A Securities, Outperform from RBC Capital, and Overweight from Cantor Fitzgerald, while Stifel and UBS rate it Hold/Neutral. The average EPS estimate is $14.52, with a low of $12.79 and high of $15.71. The average revenue estimate is $19.98 billion, implying a forward PS ratio of approximately 1.21x based on the current market cap of $24.29 billion. The consensus target price is not explicitly provided, but the EPS estimates suggest a forward PE of 7.4x at the average EPS, implying a target price of around $107, roughly in line with the current price. The high EPS estimate of $15.71 implies a target of $116, offering 8.5% upside, while the low estimate of $12.79 implies a target of $95, representing 11% downside. The wide spread (low to high) indicates high uncertainty, consistent with the recent earnings miss and cautious guidance.
Bulls vs Bears: LDOS Investment Factors
Leidos presents a classic value trap scenario: the stock appears cheap on forward earnings (P/E 8.14x) and PEG (0.82x), but this valuation is justified by a 3.6% revenue decline and cautious guidance. The bull case hinges on a rapid earnings recovery that analysts expect, while the bear case focuses on persistent revenue headwinds and competitive disruption. The single most important tension is whether the revenue deceleration is temporary (due to contract timing) or structural (loss of market share). If revenue growth resumes, the low forward multiple could compress upward; if not, the stock could fall to its 52-week low or below. Currently, bearish evidence from price action and fundamentals outweighs the valuation argument, making the stock a Hold with a cautious bias.
Bullish
- Low forward P/E of 8.14x: The forward P/E of 8.14x is significantly below the trailing P/E of 16.35x, implying the market expects a sharp earnings rebound. This low multiple could attract value investors if earnings materialize.
- PEG ratio of 0.82x suggests undervaluation: The PEG ratio of 0.82x indicates the stock is trading below its expected earnings growth rate, which typically signals undervaluation. This is supported by analyst EPS estimates averaging $14.52 for the next fiscal year.
- Strong profitability with 8.5% net margin: Leidos reported a net margin of 8.5% in Q4 2025, up from 6.5% in Q4 2024, demonstrating improving profitability. Operating margin also expanded to 12.3% from 9.6% year-over-year.
- Record profits and robust free cash flow: Despite revenue decline, Q4 2025 net income was $335 million, a record for the quarter. Free cash flow TTM stands at $1.625 billion, providing ample liquidity for dividends and debt reduction.
Bearish
- Revenue declined 3.6% YoY in Q4 2025: Q4 2025 revenue of $4.207 billion fell from $4.365 billion a year ago, marking the second consecutive quarter of year-over-year decline. This revenue deceleration is the primary driver of investor pessimism.
- Stock down 34% over the past year: LDOS has underperformed the S&P 500 by 55% over the past year, with a 1-year price change of -34.3% vs. +20.6% for the index. The stock is trading near its 52-week low of $98.86, reflecting deep bearish sentiment.
- Cautious guidance and government shutdown risk: Following the Q4 earnings miss, management issued cautious guidance, and the stock slid 6% in a single day. A potential government shutdown adds uncertainty to contract awards and revenue timing.
- Disruption from autonomous naval systems: Private companies like Saronic are developing robotic warships, threatening Leidos' traditional defense shipbuilding business. The Navy's pivot to faster, cheaper autonomous vessels could reduce demand for Leidos' legacy systems.
LDOS Technical Analysis
Leidos is in a sustained downtrend, with the stock price declining 34.34% over the past year. The current price of $107.02 sits at approximately 7% above its 52-week low of $98.86 and 48% below its 52-week high of $205.77, indicating the stock is trading near the bottom of its range. This positioning suggests a potential value opportunity, but the proximity to the low also raises the risk of further downside if fundamentals deteriorate. The 1-year price change of -34.34% versus the S&P 500's +20.63% highlights severe relative underperformance, with a relative strength of -54.97% over the period.
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
-34.2%
Cumulative gain past year
| Period | LDOS Return | S&P 500 |
|---|---|---|
| 1m | -12.8% | +1.0% |
| 3m | -31.8% | +7.9% |
| 6m | -44.1% | +8.5% |
| 1y | -34.2% | +20.1% |
| ytd | -41.9% | +9.9% |
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LDOS Fundamental Analysis
Leidos reported Q4 2025 revenue of $4.207 billion, a 3.62% year-over-year decline from $4.365 billion in the prior-year quarter. The multi-quarter trend shows revenue deceleration: Q1 2025 revenue was $4.245 billion, Q2 $4.253 billion, Q3 $4.469 billion, and Q4 $4.207 billion, indicating stagnation and a recent contraction. The National Security Solutions segment generated $5.018 billion in annual revenue, while the Civil segment contributed $2.5 billion, highlighting the reliance on government contracts. This revenue weakness, coupled with cautious guidance, has weighed on investor sentiment.
Quarterly Revenue
$4.2B
2026-01
Revenue YoY Growth
-3.6%
YoY Comparison
Gross Margin
16.0%
Latest Quarter
Free Cash Flow
$1.6B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is LDOS Overvalued?
Since net income is positive ($335 million in Q4 2025), the PE ratio is the primary valuation metric. The trailing PE is 16.35x, while the forward PE is 8.14x, implying the market expects significant earnings growth. The gap between trailing and forward PE suggests that analysts anticipate a sharp rebound in earnings, which may be optimistic given the recent revenue decline. The PEG ratio of 0.82x indicates the stock is undervalued relative to its expected earnings growth rate, but this relies on the accuracy of growth forecasts.
PE
16.4x
Latest Quarter
vs. Historical
High-End
5-Year PE Range -8x~22x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
12.1x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: Leidos faces significant financial risk from its declining revenue trajectory, with Q4 2025 revenue down 3.6% YoY and multi-quarter stagnation. The company's debt-to-equity ratio of 1.21x is high for a services firm, and interest expense of $48 million per quarter eats into margins. While free cash flow of $1.625 billion provides a cushion, continued revenue contraction could pressure cash flows and force deleveraging. The gross margin of 16% is relatively low, leaving little room for cost overruns on fixed-price government contracts.
Market & Competitive Risks: The stock's beta of 0.547 suggests low correlation to the broader market, but its 34% annual decline indicates severe company-specific risk. Valuation compression is a real threat: the trailing P/E of 16.35x could contract further if earnings disappoint, especially given the wide dispersion in analyst EPS estimates ($12.79 to $15.71). Competitive disruption from autonomous naval systems (Saronic) and potential budget reallocation away from traditional defense contractors pose long-term threats. The recent news about the Navy's pivot to robotic warships highlights a structural shift that could erode Leidos' competitive moat.
Worst-Case Scenario: In a severe downturn, Leidos could see further revenue declines, contract cancellations, and multiple compression. The 52-week low of $98.86 represents a 7.6% downside from the current price of $107.02, but if the company issues a negative pre-announcement or loses a major contract, the stock could fall to $90 or lower (a 16% decline). The maximum drawdown of -49.89% from the 52-week high suggests that in a worst-case scenario, investors could lose up to 50% from peak levels, though from current levels a 20-30% decline is plausible if fundamentals deteriorate.
FAQ
The key risks are: 1) Revenue risk: Q4 2025 revenue declined 3.6% YoY, and if this trend continues, earnings estimates will prove too high. 2) Valuation risk: The forward P/E of 8.14x could expand if earnings disappoint, but if the market loses confidence, the multiple could contract further. 3) Competitive risk: Disruption from autonomous naval systems (Saronic) and other private contractors could erode Leidos' market share in defense. 4) Macro risk: A government shutdown or defense budget cuts could delay contract awards and reduce revenue visibility. The most severe risk is a structural decline in revenue, which could lead to a 20-30% downside from current levels, potentially testing the 52-week low of $98.86.
The 12-month forecast is uncertain, with three scenarios: Bull case (25% probability) sees revenue growth returning and the stock reaching $120-$140, driven by major contract wins and a re-rating to 10x forward P/E. Base case (50% probability) expects flat revenue and earnings in line with consensus ($14.52 EPS), keeping the stock in a $100-$115 range. Bear case (25% probability) assumes further revenue decline and earnings miss ($12.79 EPS), pushing the stock down to $85-$98. The most likely outcome is the base case, given the lack of near-term catalysts and the cautious guidance. The stock's direction hinges on the next earnings report and whether revenue growth turns positive.
Leidos appears undervalued on a forward earnings basis, with a forward P/E of 8.14x compared to the trailing P/E of 16.35x. The PEG ratio of 0.82x also suggests undervaluation relative to expected growth. However, this valuation is contingent on analysts' EPS estimates of $14.52 for the next fiscal year, which may be optimistic given the recent revenue decline. The stock's PS ratio of 1.41x is below the IT services industry average of around 1.5-2.0x, but this discount is warranted by the 3.6% revenue contraction. Compared to its own history, the stock is trading near the low end of its 52-week range (52-week low $98.86, high $205.77), indicating the market is pricing in significant risk. Overall, LDOS is undervalued if earnings recover, but fairly valued if earnings stagnate. The wide dispersion in analyst estimates (low $12.79, high $15.71) highlights the uncertainty.
Leidos is a mixed proposition. On one hand, the forward P/E of 8.14x and PEG of 0.82x suggest the stock is undervalued relative to expected earnings growth. The company generates strong free cash flow ($1.625 billion TTM) and has improved margins (net margin 8.5% in Q4 2025). On the other hand, revenue declined 3.6% YoY in Q4 2025, and the stock has fallen 34% over the past year, reflecting deep investor pessimism. Analyst targets imply limited upside from the current price of $107.02, with the average target around $107. The biggest downside risk is further revenue contraction, which could push the stock to its 52-week low of $98.86 or below. For value investors with a long-term horizon and tolerance for near-term volatility, LDOS could be a buy if they believe the revenue decline is cyclical. For growth-oriented investors, it is not a good buy given the lack of top-line momentum.
Leidos is better suited for long-term investment, given its low beta of 0.547 and dividend yield of 0.87%. The stock's 34% decline over the past year and high short ratio of 3.41 indicate short-term volatility and bearish sentiment, making it risky for short-term traders. For long-term investors, the valuation is attractive if the company can stabilize revenue and grow earnings. The dividend, though modest, provides some income while waiting for a turnaround. A minimum holding period of 2-3 years is recommended to allow the revenue cycle to play out. Short-term traders should be cautious due to the lack of momentum and potential for further downside.