Leidos Holdings, Inc. (LDOS): what the price requires

The current priced-in claim for Leidos Holdings, Inc. (LDOS) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/LDOS

Headline

FieldValue
TickerLDOS
CompanyLeidos Holdings, Inc.
Current price$106.83/sh
CompositionNational Security & Digital 44% / Health & Civil 30% / Commercial & International 13% / Defense Systems 13%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed5.5%
Operating margin today12.3%
Margin compression implied-6.8pp
Multiple paid9x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 7% cost of capital with 4% terminal growth over a 5-year stage (computed at the 7% minimum rate; the CAPM rate 6.4% sits below it).

How unusual the bet is: within-range

ReferenceValue
vs own history+0.07σ
cohort percentile (of 177 peers)7
implied end-window share0%

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.

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.

FamilyMedian price/FVModelsReads
Asset0.90x5justifies
Earnings0.74x5justifies
Relative0.37x5justifies
Growth0.72x3justifies

Families that justify the price: Asset, Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.9%); the inversion above states its own rate.

Per-Model Detail (n=18)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$240.740.44xyesFCF base $1.9B, growth 2% (input: historical growth), terminal g 2.4%, WACC 8.9%, 5yr projection
DCF Exit MultipleGrowth$148.290.72xyesExit EV/EBITDA: 4.6x / 6.6x / 8.6x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$287.270.37xyesP/E 24.87x (blended: static sector reference 35x + trailing (TTM) 10x), scenarios: 20.9x / 24.9x / 28.8x (bear / base = reference held flat / bull), EV/EBITDA 17.62x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$119.340.90xyesBV/sh $39.16, ROE (TTM) 28.2%, ke 9.3%
Two-Stage Excess ReturnAsset$212.740.50xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$82.311.30xyesRev $17.3B, growth 2% (input: historical growth; tapered), Terminal P/S: 0.7x / 0.8x / 0.9x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$131.160.81xyesEPS $10.93, growth 11% (input: historical EPS growth), PEG=0.85 (Undervalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$101.991.05xyesNormalized EBIT (5y avg op income, one-time charges added back) $1.41B × (1−22%) / WACC 8.9% → EPV (no growth)
Residual IncomeAsset$180.180.59xyesBV $39.16 + 5yr PV of (ROE (TTM) 28.2% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$98.141.09xyes√(22.5 × EPS $10.93 × BVPS $39.16) — Graham's conservative floor
EV/EBITDA RelativeRelative$417.980.26xyesEBITDA $2.16B × sector EV/EBITDA 25.0x
FCF YieldEarnings$153.310.70xyesFCF $1859.0M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$144.950.74xyesSBC-adj FCF $1.76B (FCF $1.86B − SBC $0.10B) capitalized at Kₑ
Ben Graham FormulaEarnings$286.720.37xyesEPS $10.93 × (8.5 + 2×11.4%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$31.793.36xyesBV $39.16 × (ROIC 7.2% / WACC 8.9%)
P/Sales SectorRelative$1083.060.10xyesRevenue $17.33B × sector P/S 8.0x
PEG Fair ValueRelative$186.900.57xyesEPS $10.93 × (PEG 1.5 × growth 11.4% (input: historical EPS growth)) → PE 17.1x
Earnings YieldEarnings$118.160.90xyesEPS $10.93 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$5.6b
Net debt / NOPAT (after-tax)3.33x
Net debt / operating income (pre-tax)2.60x
Share count CAGR (buyback)-2.2%
Burning cashno

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

Bull Case

Start with the obvious fear, because it is also the bull case in disguise: Leidos depends almost entirely on the U.S. government, and government spending can be cut. That concentration is real. But look at what the dependence actually buys, and the fear softens. Leidos carries a backlog of about $48.4 billion, of which roughly $9.6 billion is funded and $38.8 billion unfunded, spread across intelligence and digital, health, homeland, and defense. A backlog several times annual revenue is forward visibility most companies never get, and much of it sits under long-dated, multi-year contracts. The risk the market prices is real; the offset is a revenue base contracted years in advance.

The contract structure is the moat. Much of Leidos's work runs through indefinite-delivery vehicles where, as the company describes, the government issues "task orders under the IDIQ contracts to purchase specific services or products" on pre-established terms. Once Leidos is on a vehicle, it competes for task orders against a small qualified field rather than the open market, and the incumbency on mission-critical systems is sticky because switching costs in classified and health-IT work are enormous. The data confirms the strength: revenue rose 3.7% to $4.40 billion in the most recent quarter, ahead of expectations, and management raised full-year revenue guidance to about $18.2 billion at the midpoint.

The capital return and demand backdrop round it out. Leidos has been retiring shares, with the count down about 2.2% a year, and trades at a modest multiple while growing. Defense-technology demand, including integrated air defense, is offsetting the wind-down of older programs, which is the portfolio doing what a diversified government contractor should: rotating from legacy work into higher-priority mission areas. A business with multi-year contracted visibility, sticky incumbency, raised guidance, and a low multiple is the unglamorous compounder the market tends to underprice precisely because the single-customer headline scares it.

Bear Case

The bear case for Leidos is that the price leans on a future revenue stream that depends on one customer's continued willingness and ability to pay, and that customer is the U.S. government. The company is explicit that it generates revenue "through various fixed-price and multi-year government contracts, our primary customer being the U.S. go"vernment, and that anything reducing the government's business with it would hurt results. Backlog is reassuring until you remember most of it is unfunded: of the $48.4 billion, only about $9.6 billion is funded, with $38.8 billion still requiring future appropriations. Unfunded backlog is a commitment of intent, not cash, and it can be deferred, descoped, or cancelled when budgets tighten.

The margin fragility on fixed-price work is the second dependency. Leidos's defense operating margin fell to 7.0% from 8.4% in the prior-year quarter, which the company attributed to schedule delays on a fixed-price development program. That is the structural risk of the contract mix: on fixed-price development, Leidos eats the cost of overruns and delays, so a single troubled program can compress segment profitability. As the portfolio takes on more complex, technology-heavy development work, the exposure to that kind of margin slip grows rather than shrinks.

The price assumes the contracted future converts smoothly, and that is the fragile assumption. At about 9 times operating income, the price sits low enough that it is not demanding much growth, but the entire value rests on backlog turning into funded revenue at acceptable margins, year after year, under a government budget process that is increasingly subject to "geopolitical turmoil and economic policy actions". The leverage adds a constraint: net debt near 2.7 times operating income, partly from acquisitions, with interest expense not separately reported so coverage cannot be computed cleanly. The bear is not that Leidos is a bad business; it is that the most fragile assumption in the price, that government funding and fixed-price execution both hold up, is precisely the one Leidos controls least.

Valuation

The price is making an undemanding bet on Leidos. At today's quote the shares trade around 9 times company-wide operating income, low enough that the price sits below what even a 5%-a-year decline in operating profit would justify. That is a bound, not a precise solve: the market is pricing in stagnation or mild erosion, and the question is whether the contracted backlog delivers better than that. The company-wide read frames it as a value and asset-supported name rather than a growth bet.

The methods reinforce the value framing. The relative-multiple lens against the IT-services and government-contractor cohort lands well above the current price, the forward-growth and asset-and-profitability methods reach above it, and only the most conservative reads sit near the quote. There is no overvaluation gap; the spread is on the cheap side, which is typical for a single-customer government contractor that the market discounts for budget risk. The catalyst to close the discount is not multiple expansion but simple execution: backlog converting to funded revenue at the contracted margins. The defense-margin slip to 7.0% this quarter is the reminder that execution is not automatic.

Solvency is sound but carries acquisition debt. Net debt sits at roughly 2.7 times operating income, with interest expense not separately reported so coverage cannot be computed cleanly, a small flag rather than an alarm for a business with this much contracted revenue. Liquid assets are modest against the debt. The share count is falling about 2.2% a year, real capital return that supports the equity. The downside is bounded less by the balance sheet than by the government budget cycle and fixed-price execution; the price already discounts those risks, and the backlog is the asset that makes the discount look generous if the funding holds.

Catalysts

The first quarter of 2026 beat and lifted the outlook. Revenue rose 3.7% year over year to $4.40 billion, ahead of expectations, and the company raised full-year revenue guidance to about $18.2 billion at the midpoint from $17.7 billion, with a slight bump to its adjusted earnings outlook. The strength was broad enough to offset a softer defense quarter, where operating margin fell to 7.0% from 8.4% on schedule delays in a fixed-price development program.

Backlog is the forward indicator and it stayed large. Quarter-end backlog was $48.4 billion, including $9.6 billion funded and $38.8 billion unfunded, with the segments split across intelligence and digital at $19.34 billion, defense at $12.59 billion, homeland at $9.88 billion, and health at $6.56 billion. Management pointed to fresh contract wins and strength in integrated air defense as offsetting the wind-down of older airborne surveillance work.

The near-term watch items are the conversion of unfunded backlog into funded task orders and the recovery of defense-segment margin once the troubled fixed-price program clears. Continued contract awards and the trajectory of U.S. government budget appropriations are the external signals; the cleanest internal read is whether revenue tracks the raised guidance through the back half of the year.

Peer Cohorts (Per Segment, With Filing Citations)

National Security & Digital (reported)

Health & Civil (reported)

Commercial & International (reported)

Defense Systems (reported)

Methodology Note

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

Leidos Q1 2026 earnings release, April 2026

View the full interactive LDOS report on boothcheck