HUNTINGTON INGALLS INDUSTRIES, INC. (HII): what the price assumes
In the published model solve dated 2026-Q2, anchored at $294.21, HUNTINGTON INGALLS INDUSTRIES, INC. (HII) is priced for +5.0% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-26.
Generated: 2026-08-31 · Source: https://boothcheck.com/report/HII
Headline
| Field | Value |
|---|---|
| Ticker | HII |
| Company | HUNTINGTON INGALLS INDUSTRIES, INC. |
| Sector / Industry | Industrials |
| Current price | $294.21/sh |
| Composition | Product sales 65% / Service revenues 35% |
What The Price Assumes (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin (value-band context) | 2.3% |
| Operating margin today | 5.3% |
| Margin compression (value-band) | -3.0pp |
| Implied growth | 5.0% |
| Multiple paid | 22x operating income |
The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.
Solve inputs: computed at a 7.4% cost of capital with 4% terminal growth over a 5-year stage.
How unusual the bet is: within-range (limited comparison data)
| Reference | Value |
|---|---|
| vs own history | -0.10σ |
| cohort percentile (of 225 peers) | 56 |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; earnings-power land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.41x | 5 | expensive |
| Earnings | 1.62x | 3 | expensive |
| Relative | 0.48x | 2 | justifies |
| Growth | 1.11x | 2 | expensive |
Families that justify the price: Relative, Growth Families that call it expensive: Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.5%); the inversion above states its own rate.
Per-Model Detail (n=12)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $252.50 | 1.17x | yes | Reference only (OCF-based, capex excluded): OCF $0.3B |
| DCF Exit Multiple | Growth | $0.00 | — | no | Negative/zero FCF or EBITDA — equity value floored at $0 |
| Relative Valuation | Relative | — | — | no | P/E 22x (static sector reference · 2026-04), scenarios: 18.2x / 22.0x / 25.8x (bear / base = reference held flat / bull), EV/EBITDA 14x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $181.35 | 1.62x | yes | BV/sh $134.81, ROE (TTM) 12.4%, ke 9.3% |
| Two-Stage Excess Return | Asset | $208.86 | 1.41x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $279.47 | 1.05x | yes | Rev $13.2B, growth 14% (input: historical growth; tapered), Terminal P/S: 0.7x / 0.9x / 1.0x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $588.00 | 0.50x | yes | EPS $16.80, growth 35% (input: historical EPS growth), PEG=0.50 (Undervalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $97.24 | 3.03x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.63B × (1−18%) / WACC 7.5% → EPV (no growth) |
| Residual Income | Asset | $214.55 | 1.37x | yes | BV $134.81 + 5yr PV of (ROE (TTM) 12.4% − Kₑ 9.3%) × BV; BV grows 8.1%/yr |
| Graham Number | Asset | $225.74 | 1.30x | yes | √(22.5 × EPS $16.80 × BVPS $134.81) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | — | — | no | EBITDA $1.02B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | — | — | no | — |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $542.08 | 0.54x | yes | EPS $16.80 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $37.31 | 7.89x | yes | BV $134.81 × (ROIC 2.1% / WACC 7.5%) |
| P/Sales Sector | Relative | — | — | no | Revenue $13.19B × sector P/S 2.0x |
| PEG Fair Value | Relative | $630.00 | 0.47x | yes | EPS $16.80 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $181.62 | 1.62x | yes | EPS $16.80 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Economic-Unit Decomposition (Sum Of The Parts)
One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.
| Unit | Role | Valuation basis | Revenue | Reported profit | Value evidence | Status |
|---|---|---|---|---|---|---|
| Ingalls | operating | enterprise | $3.1b | $233.0m operating-income | withheld | unresolved no unit value |
| Newport News | operating | enterprise | $6.5b | $331.0m operating-income | withheld | unresolved no unit value |
| Mission Technologies | operating | enterprise | $3.0b | $153.0m operating-income | withheld | unresolved no unit value |
No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.
Solvency
| Field | Value |
|---|---|
| Net debt | $3.2b |
| Net debt / NOPAT (after-tax) | 5.59x |
| Net debt / operating income (pre-tax) | 4.57x |
| Interest coverage | 7.1x |
| Share count CAGR (buyback) | -0.4% |
| Burning cash | no |
Bullet Takeaways
- Huntington Ingalls is the sole designer and builder of US Navy nuclear-powered aircraft carriers and a key submarine builder, a position no competitor can replicate, with a backlog of $54.0 billion.
- The defining risk is margin, not demand: shipbuilding operating margin slipped to 5.6% from 6.3% as inflation and labor costs pressured long-cycle, partly fixed-price contracts.
- Watch the margin trajectory and submarine contract awards: management guided second-quarter shipbuilding margin to 5.7% to 6% and expects Virginia- and Columbia-class contract activity.
Bull Case
Huntington Ingalls sits at a stage that is unusual for an industrial company: it is mature in the sense that its franchise is fixed and irreplaceable, yet it is entering a demand upcycle that should run for years. Its Newport News segment is, in the company's own words, in the business of "designing and constructing nuclear-powered aircraft carriers and submarines, and the refueling and overhaul and the inactivation of nuclear-powered" ships. That is a monopoly. No one else in the United States builds nuclear carriers, and the submarine industrial base is a duopoly with General Dynamics. When the customer is the US Navy and the product takes a decade to build and a lifetime to service, the revenue is about as visible as it gets in any industry.
The backlog quantifies that visibility. HII reported $4.0 billion of new awards in the first quarter of 2026, lifting total backlog to $54.0 billion, several years of revenue already under contract. Revenue grew 13.4% to $3.1 billion in the quarter, with Newport News up 19.3%, reflecting a Navy that is prioritizing fleet expansion and submarine production to meet strategic needs. A company with this kind of order book does not have to win new customers; it has to execute on work already committed.
The forward demand environment is the tailwind. Geopolitical pressure and the AUKUS submarine commitments have made naval shipbuilding a national priority, and management expects continued Virginia- and Columbia-class submarine contract activity. As the Navy funds the industrial base to lift production rates, HII is the prime beneficiary. The relative-multiple and growth-oriented valuation methods reach the current price, reflecting that the market sees the demand runway. The bull case is a defensively positioned monopoly franchise with a multi-year backlog entering a structural upcycle in naval procurement.
Bear Case
The variable that most threatens Huntington Ingalls is the one it cannot control: the federal budget. HII has effectively a single customer, the US Navy, and the company is explicit that "U.S. defense spending priorities that reduce the demand for the types of ships we build and services we provide increase our exposure to market competition risk." A shift in procurement priorities, a budget impasse, or a reallocation away from large surface ships toward unmanned or distributed systems would hit a company with nowhere else to sell. The current upcycle is real, but it rests on political commitments that can change with an administration or a continuing resolution, and the price does not reflect that single-customer concentration as a discount.
The more immediate problem is on the income statement: the margins are thin and shrinking. Shipbuilding operating margin fell to 5.6% in the first quarter from 6.3% a year earlier, and the cause is structural to the business. Many of HII's contracts are long-cycle and partly fixed-price, and the company warns that costs to complete a contract can "differ materially from our initial estimates" because of "inflation" and other factors. When a shipyard signs a fixed-price contract years before delivery and then absorbs wage and material inflation, the margin compresses with no easy way to pass it on. A company earning a 5% operating margin has almost no buffer, and that is exactly what the asset-value and earnings-power methods flag when they read the stock as expensive.
The cash picture compounds the concern. Free cash flow was negative $461 million in the quarter, reflecting working-capital demands on long-cycle programs, and the timing of milestone payments makes HII's cash lumpy and back-end loaded. The company carries about $3.2 billion of net debt at roughly 5 times operating income. At about 23 times operating income the price assumes 6.6% annual operating-profit growth for five years; a company with compressing margins, negative interim cash flow, and a single budget-dependent customer is a demanding bet to underwrite at a multiple in the upper half of its peer range.
Valuation
At about $285 (June 27, 2026) Huntington Ingalls trades near 23 times company-wide operating income, which inverts into an assumption of roughly 6.6% annual operating-profit growth over five years. That pace is within what the company has recently delivered, so the question is durability, and the multiple sits in the upper half of its defense-peer range. The growth has to come largely from margin recovery on top of revenue growth, because the current operating margin near 5% is depressed by inflation on long-cycle contracts.
The methods divide on whether to credit that recovery. The relative-multiple and growth-oriented methods reach the price, valuing the backlog and the demand upcycle. The asset-value and earnings-power methods read the stock as expensive, because they anchor on the thin current margins and the modest return on the large invested capital a shipyard requires. The peer-multiple read uses a sector P/E near 22 times, which the stock roughly satisfies. The honest framing is that the price is defended by the order book and the procurement tailwind, not by trailing profitability, and the spread between the two camps is the market pricing in a margin normalization that has not yet shown up in the numbers.
Solvency is sound but the cash flow is lumpy. Net debt of about $3.2 billion sits at roughly 5 times operating income, with interest coverage near 6.6 times. The complication is timing: free cash flow was negative $461 million in the quarter because long-cycle shipbuilding ties up working capital, and HII's cash generation is back-end loaded toward program milestones. The company is not in financial distress, and the contracted backlog underpins the debt, but a buyer should expect cash to arrive unevenly. What a holder underwrites at this price is an irreplaceable naval franchise with a multi-year backlog, priced for a margin recovery and continued procurement growth, with defense-budget priorities and fixed-price contract execution as the risks the upper-half multiple leaves little room for.
Catalysts
Huntington Ingalls beat estimates in its first quarter of 2026, with revenue up 13.4% to $3.1 billion and net earnings of $149 million, or $3.79 per diluted share. Newport News Shipbuilding revenue rose 19.3% to $1.665 billion and Ingalls Shipbuilding 13.8% to $725 million. The cause behind the top-line strength was rising Navy production volume, while the key tension was margin: segment operating margin slipped to 5.6% from 6.3% a year earlier, reflecting inflation and labor pressure on long-cycle contracts.
The order book strengthened. HII booked $4.0 billion of new awards in the quarter, lifting total backlog to $54.0 billion, providing multiple years of contracted revenue visibility. Free cash flow was negative $461 million, consistent with the working-capital demands of long-cycle shipbuilding and the milestone-driven timing of payments.
Management reaffirmed full-year 2026 guidance and guided second-quarter shipbuilding revenue to about $2.4 billion at a 5.7% to 6% margin, while signaling expected Virginia- and Columbia-class submarine contract activity in the second quarter. The catalysts to watch are the recovery in shipbuilding margins, the pace of submarine contract awards as the Navy funds higher production rates, and the federal defense-budget environment, which is the external variable with the most leverage on HII's single-customer demand.
Peer Cohorts (Per Segment, With Filing Citations)
Ingalls (reported)
- GD (GENERAL DYNAMICS CORPORATION)
- FY2025 10-K: …in backlog by region on December 31, 2025: DEFENSE SEGMENTS The total backlog in our defense segments represents the estimated remaining sales value of work to be performed under firm contracts. The funded portion of total backlog includes items that have been authorized and appropriated by the Congress and funded by…
- FY2025 10-K: …and modernizing the Healthcare Integrated General Ledger Accounting System (HIGLAS) for the Centers for Medicare and Medicaid Services (CMS). HIGLAS is a single, integrated accounting system that standardizes and centralizes federal financial accounting for all of CMS's programs. The HIGLAS system processes…
- NOC (NORTHROP GRUMMAN CORP /DE/)
- FY2025 10-K: …growth and a series of acquisitions and divestitures, including the following: • 1994 - Acquired Grumman Corporation, a premier military aircraft systems integrator. The combined company was renamed Northrop Grumman Corporation; • 1996 - Acquired the defense and electronics businesses of Westinghouse Electric…
- FY2025 10-K: …net consisted of the following: December 31 $ in millions 2025 2024 Due from U.S. government (1) Unbilled receivables $ 23,730 $ 22,871 Progress and performance-based payments received ( 17,674 ) ( 17,300 ) Total due from U.S. government 6,056 5,571 Due from international and other customers Unbilled receivables…
- LMT (LOCKHEED MARTIN CORPORATION)
- FY2025 10-K: …lmt:InternationalMember lmt:MissilesAndFireControlMember 2023-01-01 2023-12-31 0000936468 us-gaap:OperatingSegmentsMember lmt:InternationalMember lmt:RotaryAndMissionSystemsMember 2023-01-01 2023-12-31 0000936468 us-gaap:OperatingSegmentsMember lmt:InternationalMember lmt:SpaceMember 2023-01-01 2023-12-31 0000936468…
- FY2025 10-K: …lmt:UnitedStatesCommercialAndOtherMember lmt:AeronauticsMember 2025-01-01 2025-12-31 0000936468 us-gaap:OperatingSegmentsMember lmt:UnitedStatesCommercialAndOtherMember lmt:MissilesAndFireControlMember 2025-01-01 2025-12-31 0000936468 us-gaap:OperatingSegmentsMember lmt:UnitedStatesCommercialAndOtherMember…
- TXT (Textron Inc.)
- FY2025 10-K: -01-01 2023-12-30 0000217346 us-gaap:PerformanceSharesMember 2024-12-29 2026-01-03 0000217346 us-gaap:PerformanceSharesMember 2024-12-28 0000217346 us-gaap:PerformanceSharesMember 2026-01-03 0000217346 us-gaap:PerformanceSharesMember 2023-12-31 2024-12-28 0000217346 us-gaap:PerformanceSharesMember 2023-01-01…
- FY2025 10-K: …2024-12-28 0000217346 txt:FinancialAssetsCurrentAndLessThan31DaysPastDueMember 2026-01-03 0000217346 txt:FinancialAssetsCurrentAndLessThan31DaysPastDueMember 2024-12-28 0000217346 txt:FinancialAssets31To60DaysPastDueMember 2026-01-03 0000217346 txt:FinancialAssets31To60DaysPastDueMember 2024-12-28 0000217346…
Newport News (reported)
- GD (GENERAL DYNAMICS CORPORATION)
- FY2025 10-K: …cybersecurity risks related to third-party vendors and service providers. Our companywide Cyber Council , comprised of information technology and cybersecurity executives from our business units, shares information and cybersecurity practices throughout the company, recommends policy and procedure updates and tracks…
- FY2025 10-K: -gaap:FairValueInputsLevel3Member gd:InsuranceDepositAgreementsMember 2025-01-01 2025-12-31 0000040533 us-gaap:FairValueInputsLevel3Member us-gaap:FixedAnnuityMember 2025-01-01 2025-12-31 0000040533 us-gaap:FairValueInputsLevel3Member us-gaap:RealEstateFundsMember 2025-01-01 2025-12-31 0000040533…
- BWXT (BWX Technologies Inc)
- FY2025 10-K: …nuclear capabilities including, but not limited to, Framatome, Cameco Corporation, Doosan Heavy Industries & Construction Co., Ltd., AECON Group Inc., Westinghouse Electric Corporation and AtkinsRéalis. The primary bases of competition for this segment are price, technical capabilities, quality, timeliness of…
- FY2025 10-K: Los Alamos Legacy Cleanup Contract. Newport News Nuclear BWXT - Los Alamos, LLC, a limited liability company formed by Stoller Newport News Nuclear, Inc., a subsidiary of Huntington Ingalls Industries, Inc.'s Technical Solutions division, and BWXT Technical Services Group, Inc. ("BWXT TSG"), was awarded a contract to…
- NOC (NORTHROP GRUMMAN CORP /DE/)
- FY2025 10-K: …growth and a series of acquisitions and divestitures, including the following: • 1994 - Acquired Grumman Corporation, a premier military aircraft systems integrator. The combined company was renamed Northrop Grumman Corporation; • 1996 - Acquired the defense and electronics businesses of Westinghouse Electric…
- FY2025 10-K: …as successor to JPMorgan Chase Bank, Trustee, to Indenture dated as of November 21, 2001 (incorporated by reference to Exhibit 4(a) to Form 8-K filed May 31, 2013 ) 4(aa) Form of 4.750% Senior Note due 2043 (incorporated by reference to Exhibit C to Exhibit 4(a) to Form 8-K filed May 31, 2013 ) -94- Table of Contents…
- LMT (LOCKHEED MARTIN CORPORATION)
- FY2025 10-K: …Corporation's Current Report on Form 8-K filed with the SEC on August 31, 2006). 4.4 Indenture, dated as of March 11, 2008, between Lockheed Martin Corporation and The Bank of New York (incorporated by reference to Exhibit 4.1 to Lockheed Martin Corporation's Current Report on Form 8-K filed with the SEC on March 12,…
- FY2025 10-K: …facilities and at third-party-owned sites where we have been designated a potentially responsible party 21 Table of Contents as a result of our historical activities and those of our predecessor companies. Environmental remediation activities usually span many years, and the extent of financial exposure can be…
Mission Technologies (reported)
- LDOS (Leidos Holdings, Inc.)
- FY2025 10-K: …across these reportable segments. NATIONAL SECURITY & DIGITAL Our National Security & Digital business provides leading-edge and technologically advanced services, solutions and products across substantially all U.S. federal government customers. Our advanced capabilities allow us to provide technology-enabled…
- FY2025 10-K: …more than 120 countries, including people scanners, computed tomography carry-on baggage scanners, checked baggage scanners, and explosive trace detectors. We are also the primary supplier to CBP and other 4 Leidos Holdings, Inc. Annual Report Table of Contents PART I international customers of mobile, non-intrusive…
- BAH (BOOZ ALLEN HAMILTON HOLDING CORPORATION)
- FY2025 10-K: …and product offerings, we believe we are creating sustainable quality growth for the Company. Our Core Technology, Expertise, and Innovation Our technologists and mission experts identify, assess, build, and deploy technology solutions to advance and protect the nation using AI, cyber, and other cutting-edge…
- FY2025 10-K: …environment, highly differentiated across a portfolio of scaled mission and technology businesses, and recognized for integrating, applying, and scaling technologies in the service of national mission priorities. Our Customers Booz Allen is committed to solving our customers' toughest challenges, and we work with a…
- SAIC (Science Applications International Corporation)
- FY2025 10-K: …management and operations, sustainment and security of the customers' entire IT infrastructure. Our long-standing customer relationships have enabled us to achieve an in-depth understanding of our customers' missions and provide differentiated service offerings to meet our customers' most complex requirements.…
- FY2025 10-K: …development and integration services, training, logistics and sustainment. These full life cycle offerings, combined with deep customer knowledge, allow us to more effectively support our customers' missions. Significant Scale and Diversified Contract Base. With approximately $7.5 billion in revenue in fiscal 2025,…
- CACI (CACI International Inc)
- FY2025 10-K: …needs. Our proven Expertise and Technology and strong record of program delivery have enabled us to compete for and secure new customers and contracts, win repeat business, and build and maintain long-term customer relationships. We seek competitive business opportunities and have built our operations to support…
- FY2025 10-K: …We provide Expertise and Technology to government customers. We believe that the total addressable market for our offerings is sufficient to support the Company's plans and is expected to continue to grow over the next several years. Approximately 75% of our revenue comes from defense-related customers, including…
- KBR (KBR, Inc.)
- FY2025 10-K: …Solutions segment. We will begin reporting new segment information due to this change beginning the first fiscal quarter of 2026. 10 Mission Technology Solutions Spin-off In September 2025, we announced our intention to spin off our Mission Technology Solutions business into a separate, U.S. publicly-traded company…
- FY2025 10-K: …and other government agencies primarily in the U.S., U.K. and Australia. KBR's full-spectrum solutions span research and development, advanced prototyping, acquisition support, systems engineering, C5ISR, cyber analytics, space domain awareness, test and evaluation, data analytics and integration, systems integration…
- PSN (Parsons Corporation)
- FY2025 10-K: …customers. The company also provides autonomous and distributed detection, identification, exploitation and the defeat of today's most complex communications. • Braxton Science and Technology Group, LLC: Acquired in November 2020 at a purchase price of $310.9 million ($267 million less the tax asset), Braxton…
- FY2025 10-K: …systems, integration, and warfighter applications. Our customers span the U.S. Intelligence Community, including the National Geospatial-Intelligence Agency (NGA), National Reconnaissance Office (NRO)); U.S. Department of War (DOW) (military services, and Special Operations Command (SOCOM)). Representative products…
- DRS (Leonardo DRS, Inc.)
- FY2025 10-K: ASC") and Integrated Mission Systems ("IMS"). For information regarding segment performance see Part II, Item 7, " Management's Discussion and Analysis of Financial Condition and Results of Operations " in this Annual Report. Advanced Sensing and Computing Our ASC segment designs, develops and manufactures sensing and…
- FY2025 10-K: …Mission Systems 372,856 Leased 100 North Babcock Street, Melbourne, FL Manufacturing, Engineering, Warehouse, Office Advanced Sensing and Computing 336,287 Leased 6060 Highway, High Ridge, MO Manufacturing, Engineering, Office Integrated Mission Systems 183,600 Owned 4201 Innovation Way, Bridgeton, MO Manufacturing,…
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
HII Q1 2026 results, May 2026 · HII FY2025 10-K