LDOS

Based on a comprehensive review of LDOS, the analysis presents a mixed but cautiously optimistic picture for investors.

Technical Analysis: The stock shows positive short-term momentum, trading near its 52-week high. Its low beta indicates it is a less volatile holding compared to the broader market, which is attractive for risk-averse investors. However, its recent underperformance against the market suggests it may not capture all upside during strong rallies.

Fundamentals & Valuation: LDOS exhibits solid revenue growth and strong, stable profitability with healthy margins. Its financial health is sound, though it carries moderate leverage. The primary concern is valuation; while the P/E ratio is reasonable, the extremely high EV/EBITDA ratio signals the stock may be fully priced or stretched relative to its cash flow.

Risk & Peer Comparison: LDOS is a lower-risk holding due to its low volatility and lack of bearish short interest, typical for a stable government contractor. However, its high EV/EBITDA stands out as a potential red flag when considered against industry peers, indicating the market may have high expectations already baked into the price.

Buy Recommendation: LDOS is a high-quality, defensive stock with reliable government contracts supporting its steady revenue and profit. It is suitable for investors seeking lower volatility and stable growth rather than explosive returns. Given its current valuation sitting at the higher end of its range and the elevated EV/EBITDA, it is best to consider buying on any market-driven pullbacks. This approach would provide a more attractive entry point for a long-term position in a fundamentally sound company.

RockFlow Model Forecast: Three Scenarios for 2026

Of course. Here is a 12-month outlook for Leidos Holdings (LDOS):

12-Month Outlook for LDOS:

The outlook for LDOS is positive, driven by its stable foundation of government contracts, particularly in high-demand areas like defense technology and cybersecurity. Key catalysts include the potential for new contract awards and budget allocations that favor national security spending.

The primary risk is its current valuation; the high EV/EBITDA ratio suggests much of this optimism is already priced in, making the stock vulnerable to a pullback if growth moderates or if there are delays in contract funding.

Given the solid fundamentals but premium valuation, a realistic 12-month target price range would be $210-$230. Achieving the upper end of this range is contingent on the company securing significant new contracts that demonstrate an acceleration in growth beyond current expectations.

Wall Street Consensus

Most Wall Street analysts are optimistic about LDOS's 12-month outlook, with consensus target around $190.82, indicating expected upside potential.

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

Overall Assessment: LDOS has demonstrated positive momentum in recent months, with gains of 2.85% over the past month and 0.98% over the past quarter, though it has marginally underperformed the broader market benchmark by -2.39% during the latter period.

Short-term Performance: The stock's recent 1-month performance is notably stronger than its 3-month trend, indicating accelerating positive momentum. Despite this recent strength, the -2.39% relative performance versus the market over three months suggests LDOS has lagged behind broader market gains during this period, though its low beta of 0.592 indicates significantly less volatility than the overall market.

Current Position: Trading at $195.96, LDOS sits near the upper end of its 52-week range ($123.62-$205.77), approximately 7% below its yearly high. This proximity to the range ceiling, combined with the stock's maximum drawdown of -21.28% over the past year, suggests the current price level may represent a relatively elevated position rather than an extreme overbought condition.

Of course. Here is a fundamental analysis of Leidos Holdings, Inc. (LDOS) based on the provided data.

**1. Revenue & Profitability**

LDOS demonstrates solid top-line growth, with revenue increasing from $4.25 billion in Q2 to $4.47 billion in Q3. Profitability remains strong and stable, with a gross profit margin consistently around 18.4% and a healthy net income margin of 8.2% in Q3. The company's operating income margin of approximately 12% indicates effective control over its operating expenses, supporting robust bottom-line performance.

**2. Financial Health**

The company maintains a sound financial position, evidenced by strong liquidity ratios, including a current ratio of 1.62 and a quick ratio of 1.50. However, leverage is notable, with a debt-to-equity ratio of 1.07, indicating a reliance on debt financing. This is managed by a strong interest coverage ratio of 10.5, showing that operating profits amply cover interest expenses. The cash flow to debt ratio of 0.14 suggests that generating enough cash to pay down debt could be a longer-term focus.

**3. Operational Efficiency**

Operational efficiency is mixed. The return on equity (ROE) is a modest 7.5%, which is somewhat low for the capital employed. This is partly explained by a low asset turnover ratio of 0.33, indicating that the company is not generating a high volume of sales relative to its asset base. Conversely, an inventory turnover of 10.1 is efficient, suggesting effective management of its inventory levels. The disparity points to a business model that is asset-intensive, which is typical for a government services and technology contractor like Leidos.

Valuation Level: LDOS appears moderately priced based on traditional valuation metrics, with trailing and forward PE ratios around 17 suggesting reasonable earnings valuation despite the elevated PB ratio of 5.05. However, concerning signals emerge from the negative PEG ratio, which reflects earnings decline expectations, and the exceptionally high EV/EBITDA of 48, indicating potentially stretched valuation relative to cash flow generation. The PS ratio of 1.46 appears reasonable for a technology services company but must be considered alongside the negative growth indicators.

Peer Comparison: Without specific industry average data, definitive peer comparison is limited, though LDOS's valuation profile suggests mixed positioning relative to typical defense/technology services firms. The PE ratios around 17 would likely align with industry norms for established government contractors, while the elevated PB ratio of 5.05 may exceed sector averages given the asset-light nature of many peers. The remarkably high EV/EBITDA ratio of 48 appears substantially above what would be expected for mature government services companies, warranting further investigation into exceptional items or unique business model characteristics.

Volatility Risk: LDOS demonstrates significantly lower volatility compared to the broader market, as evidenced by its beta of 0.592, suggesting it is approximately 40% less volatile. The stock experienced a moderate one-year maximum drawdown of -21.28%, which aligns with its defensive beta profile and indicates contained volatility-related losses.

Other Risks: There appears to be no meaningful short interest in LDOS, which suggests strong investor conviction and a lack of prominent bearish sentiment. The primary non-volatility risk would likely relate to liquidity or execution risk on large transactions, though general liquidity is typically adequate for a sizable company.