Leidos Holdings, Inc.

Based on a comprehensive analysis, Leidos Holdings (LDOS) presents a nuanced investment case that currently leans cautious despite some strong fundamental qualities.

From a technical perspective, the stock is in a clear downtrend, having significantly underperformed the market and trading near one-year lows. While this suggests it may be oversold, a definitive bottom has not been established. Fundamentally, the company is a picture of health, boasting strong revenue, robust profitability, minimal debt, and excellent liquidity. However, the valuation is challenging; a modest P/E ratio is overshadowed by a very high EV/EBITDA and a negative PEG ratio, indicating the market may be overvaluing its cash flow relative to its growth prospects.

Recommendation: HOLD. While LDOS's financial foundation is exceptionally solid and its low beta offers defensive characteristics, the combination of negative price momentum and questionable valuation metrics suggests it is prudent to wait. Investors should monitor for a stabilization in the stock's technical chart or more attractive valuation levels before considering a new position. This is not investment advice, for reference only.

RockFlow Model Forecast: Three Scenarios for 2026

Based on a comprehensive analysis, here is a 12-month outlook for Leidos Holdings (LDOS):

12-Month Outlook for LDOS

The primary catalyst for LDOS will be the successful execution and funding of its substantial contract backlog, particularly in high-demand areas like defense technology and cybersecurity, which could reignite investor confidence. However, key risks include persistent negative price momentum failing to find a bottom and the market's continued skepticism regarding its premium valuation (high EV/EBITDA), especially if growth moderates. Given the absence of a clear analyst target, a cautious target price range would be wide, reflecting the current uncertainty, but a move toward the $170-$180 area would require a definitive break above key technical resistance and a positive reevaluation of its growth prospects.

Wall Street Consensus

Most Wall Street analysts are optimistic about Leidos Holdings, Inc.'s 12-month outlook, with consensus target around $176.27, indicating expected upside potential.

Overall, LDOS has investment potential but also faces challenges. Here are key factors to weigh before investing.

LDOS has exhibited significant weakness with substantial declines over recent periods. The stock is currently trading near the lower end of its 52-week range, suggesting a challenging environment.

The stock has experienced sharp declines of over 16% in one month and nearly 19% over three months, significantly underperforming the broader market by 18.5% during this period. This substantial underperformance highlights considerable downward pressure relative to market benchmarks.

Currently trading approximately 21% below its 52-week high and near one-year lows, LDOS appears to be in an oversold condition. However, its position remains about 31% above its 52-week low, indicating some support level exists despite recent heavy selling pressure.

Revenue & Profitability LDOS demonstrated solid revenue levels above $4.2 billion in Q4 2025, though this represented a sequential decline from Q3's $4.47 billion. Profitability remained robust with a net profit margin of approximately 8%, while the operating margin of 11.2% indicates effective core operational control. The gross profit ratio of 16% suggests the company maintains a reasonable margin on its services.

Financial Health The company exhibits strong financial health with a low debt-to-equity ratio of just 0.12, indicating minimal leverage and conservative financing. Strong liquidity is evidenced by a current ratio of 1.70 and a healthy interest coverage ratio of 9.8x, showing ample capacity to service debt obligations. The cash ratio of 0.39 provides adequate short-term liquidity cushion.

Operational Efficiency LDOS shows moderate operational efficiency with a return on equity of 6.8% and return on assets of 2.5%, reflecting adequate but not exceptional capital utilization. The asset turnover ratio of 0.31 suggests the company generates moderate revenue relative to its asset base. The 57.9 days sales outstanding indicates reasonable receivables management in its contracting business model.

Based on the available metrics, LDOS's valuation presents a mixed picture. The trailing P/E ratio of 13.87, while higher than the forward P/E of 18.13, suggests a reasonable valuation relative to current earnings. However, the significantly negative PEG ratio of -1.53 is a major concern, as it implies negative expected earnings growth and renders the metric unreliable for valuation. The elevated EV/EBITDA of 42.76 indicates that the market is valuing the company's core operational cash flow at a substantial premium.

Without specific industry average data for a direct peer comparison, a broader assessment is necessary. The company's Price-to-Book ratio of 4.17 suggests the market values its assets significantly above their accounting value, which is common for firms with valuable intangible assets. Overall, the combination of a modest P/E but a very high EV/EBITDA and a problematic PEG ratio makes a definitive valuation conclusion difficult without industry context, but it leans toward being potentially overvalued based on cash flow metrics.

Volatility Risk: LDOS exhibits historically low volatility risk, as evidenced by its Beta of 0.62, indicating it is 38% less volatile than the broad market. The stock's one-year maximum drawdown of -19.05% demonstrates moderate downside capture during market stress, albeit better than the typical market average due to its lower beta profile.

Other Risks: A notable positive factor is the apparent absence of speculative short interest, suggesting minimal negative sentiment from bearish investors. However, the reliance on government contracting presents a unique risk profile, including potential budget fluctuations and regulatory changes, which are not reflected in standard market-based metrics.