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

boothcheck covers Leidos Holdings, Inc. (LDOS) but does not put one priced-in number on it: here the defensible answer is the evidence rather than a point estimate. boothcheck publishes no house fair value, target price, or buy/sell rating. Narrative composed 2026-06-27.

Generated: 2026-08-31 · Source: https://boothcheck.com/report/LDOS

Headline

What The Price Assumes (Inversion)

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

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.

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 6.8% sits below it).

How unusual the bet is: within-range (limited comparison data)

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.

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 9.0%); the inversion above states its own rate.

Per-Model Detail (n=15)

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.

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

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

Bullet Takeaways

• Leidos is a government services and technology contractor across national security, health, civil, and defense systems, and it sits on a backlog of about $48.4 billion, roughly $9.6 billion of it already funded.
• Almost all of its revenue comes from one customer, the U.S. government, which is both the source of its stability and its single largest risk if budgets or appropriations tighten.
• The stock trades at a low multiple of profits, around 9 times operating income, while management has raised full-year revenue guidance, so the next read is whether backlog converts to revenue at the margins the contracts assume.

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)

• CRWD (CrowdStrike Holdings Inc)
• FY2025 10-K: …hunting and timely detection and remediation of novel threats. • Our Intel Graph, which analyzes and correlates data and threat intelligence to visualize the connections between adversaries and attacks to help customers prioritize investigations and gain a deep understanding of the threat landscape. The latest intel…
• FY2025 10-K: …evolving customer needs; • our ability to attract, retain, and motivate talented employees; • our ability to establish and maintain relationships with channel partners and direct customers; • the strength of our sales and marketing efforts; • the strength of our reputation and brand, including the impact to our…
• PANW (Palo Alto Networks Inc)
• FY2025 10-K: Advanced URL Filtering, Advanced DNS Security, IoT/OT Security, GlobalProtect ® , Prisma Access Agent, Enterprise Data Loss Prevention ("Enterprise DLP"), AI for IT Operations ("AIOps"), Software as a Service ("SaaS") Security, and AI Access Security. Through these add-on services, our customers are able to secure…
• FY2025 10-K: …part of customer's security teams to aid in the implementation and operation of their Palo Alto Networks capabilities. Our education services include certifications, as well as free online technical courses and in-classroom training, which are primarily delivered through our authorized training partners. RESEARCH AND…
• FTNT (Fortinet Inc)
• FY2025 10-K: …or enhancements by us or our competitors, or any other change in the competitive landscape of our industry, including consolidation among our competitors, partners or end-customers; • the deferral of orders from distributors, resellers or end-customers in anticipation of new products or product enhancements announced…
• FY2025 10-K: …also attempt to fraudulently induce our employees to transfer funds or 27 Table of Contents disclose information in order to gain access to our networks and confidential information. Third parties may also send our customers or others malware or malicious emails that falsely indicate that we are the source,…
• ZS (Zscaler Inc)
• FY2025 10-K: …network by deploying decoys. These decoys disrupt adversaries by detecting their presence in the network and initiating mitigation using automatic orchestration via the Zscaler platform and other third-party solutions. Customers can quickly deploy these capabilities by leveraging a diverse library of built-in decoys…
• FY2025 10-K: …dashboards and reporting and can stream logs to a third-party SIEM service as they arrive. Regardless of where users are located, customers can choose to have logs stored in the United States or the European Union/Switzerland. Customer data is isolated as part of our multi-tenant architecture. • Data Fabric for…
• S (SentinelOne Inc)
• FY2025 10-K: …including decisions by organizations to purchase security solutions from larger, more established security vendors or from their primary IT equipment vendors and insolvency or credit difficulties confronting our customers, affecting their ability to purchase or pay for our solution • the timing and length of our…
• FY2025 10-K: …across a broad range of industries. Our AI and automation driven approach to cybersecurity has been adopted by some of the world's largest organizations. As a result, we have grown rapidly since our inception. Our revenue for fiscal 2025 and 2024 was $821.5 million and $621.2 million, respectively, representing…
• OKTA (Okta Inc)
• FY2025 10-K: …and security requirements in their collection and use of data within our online service, but these features have, in the past, not ensured and may, in the future, not ensure our customers' compliance and may not be effective against all potential privacy or related regulatory concerns. Many jurisdictions have enacted…
• FY2025 10-K: …threats or incidents. There can be no assurance that Okta, Inc.'s cybersecurity risk management program and processes will be fully implemented. Even if implemented, they may not be complied with or may not effectively protect our systems and information or those of our customers. Cybersecurity Risk Management and…
• QLYS (QUALYS, INC.)
• FY2025 10-K: …results and reputation. Our solutions could be used to collect and store personal information of our customers ' employees or customers, and therefore privacy and other data handling concerns could result in additional cost and liability to us or inhibit sales of our solutions. We collect certain personal and…
• FY2025 10-K: …its own data security and privacy legal framework with which we or our customers must comply. 28 Table of Contents These privacy, data protection, and cybersecurity laws and regulations may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions. Additionally, new…

Health & Civil (reported)

• MMS (Maximus, Inc.)
• FY2025 10-K: Health Benefits program each year during its open enrollment period, handling the surge in customer calls. The way we deliver these services differs between contracts but may include a combination of digitally enabled contact centers, mail-room operations, and mobile or web-based platforms. Clinical Services. In line…
• FY2025 10-K: …challenges. As a trusted and accountable partner to primarily U.S. federal and state customers, we proudly design, develop, and deliver innovative and efficient programs that improve government's effectiveness in serving its citizens. We create value for our customers through our ability to translate public policy…
• SAIC (Science Applications International Corporation)
• FY2025 10-K: …including subcontracts with other contractors engaged in work for the U.S. government. The Company disaggregates revenues by customer, contract type and prime versus subcontractor to the federal government for each of its reportable segments. Disaggregated revenues by customer were as follows: F-21 Table of Contents…
• FY2025 10-K: …commercial customers include provisions that allow the customer to cancel prior to contract completion. Most of our contracts have cancellation terms that would permit us to recover all or a portion of our incurred costs and fees (contract profit) for work performed. The estimated value of our total backlog as of the…
• 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: …in which the customer-imposed contract type or terms appear to expose us to inappropriate risk or do not offer us a sufficient financial return, we may seek alternate arrangements or opt not to bid for the work. Essentially all contracts with the U.S. government, and many contracts with other government entities,…
• BAH (BOOZ ALLEN HAMILTON HOLDING CORPORATION)
• FY2025 10-K: …immigration, energy, transportation, and labor, we work at the core of the mission to modernize systems, boost efficiencies, and save money. Our major civil government customers include the Departments of Veterans Affairs, Health and Human Services, Treasury, Labor, Homeland Security, Justice, Energy, Commerce, and…
• FY2025 10-K: "SOFA") to U.S. and non-U.S. government customers. 4 Table of Contents Intelligence Customers We deliver innovative, highly technical capabilities and solutions that directly impact core national security missions across the Intelligence Community and national cyber mission providers. We leverage our knowledge of the…
• ACN (Accenture plc)
• FY2025 10-K: …and industry organizations and associations Human and social services agencies; defense departments and military forces; public safety authorities, including justice departments; educational institutions; non-profit organizations; cities; transportation agencies; and postal, customs, revenue and tax agencies Our work…
• FY2025 10-K: …certification, which we appealed. On August 17, 2023, the appeals court vacated the class certification and remanded the case to the district court for consideration of, among other things, the class action waiver signed by Starwood customer plaintiffs. On November 29, 2023, the district court reinstated the classes…
• PSN (Parsons Corporation)
• FY2025 10-K: …contractual obligations. Misconduct by our employees, subcontractors, agents or business partners could subject us to fines and penalties, restitution or other damages, loss of security clearance, loss of current and future customer contracts and suspension or debarment from contracting with federal, state or local…
• FY2025 10-K: …operations and platforms for our U.S. Department of War and Intelligence Community customers. o Space and Mission Defense - Extend our space situational awareness, ground systems, classified sensors and assured position, navigation and timing solutions to our current space customers and to new space, and geospatial…

Commercial & International (reported)

• OSIS (OSI SYSTEMS, INC.)
• FY2025 10-K: …and manufacture products in anticipation of customer orders based on customer forecasts. For a variety of reasons, such as decreased end-user demand for our products or other factors, our customers might not purchase all the products that we have manufactured or for which we have purchased components. If we are…
• FY2025 10-K: …an important strategic advantage over competitors. First, our international manufacturing facilities allow us to take advantage of competitive labor rates in order to lower our manufacturing costs. Second, our international offices strengthen our sales and marketing efforts and our ability to service and repair our…
• SAIC (Science Applications International Corporation)
• FY2025 10-K: …commercial customers include provisions that allow the customer to cancel prior to contract completion. Most of our contracts have cancellation terms that would permit us to recover all or a portion of our incurred costs and fees (contract profit) for work performed. The estimated value of our total backlog as of the…
• FY2025 10-K: …Condition and Results of Operations" in Part II, Item 7 of this report. Competition Competition for contracts is intense, and we often compete against a large number of established multinational companies, which may have greater name recognition, financial resources and larger technical staffs than we do. We also…
• CACI (CACI International Inc)
• FY2025 10-K: …in a highly competitive industry that includes many firms, some of which are larger in size and have greater financial resources than we do. We obtain much of our business on the basis of proposals submitted in response to requests from potential and current customers, who may also receive proposals from other firms.…
• 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…
• PSN (Parsons Corporation)
• FY2025 10-K: …operations and platforms for our U.S. Department of War and Intelligence Community customers. o Space and Mission Defense - Extend our space situational awareness, ground systems, classified sensors and assured position, navigation and timing solutions to our current space customers and to new space, and geospatial…
• FY2025 10-K: …to our customers' most challenging current and emerging requirements. We have significant expertise and differentiated capabilities in six growing, enduring and profitable end markets including cyber and electronic warfare, space and missile defense, critical infrastructure protection, transportation, water and…

Defense Systems (reported)

• BWXT (BWX Technologies Inc)
• FY2025 10-K: …with manufacturing integration. This segment's capabilities include: • steam generation and separation equipment design and development; • thermal-hydraulic design of reactor plant components; • in-plant inspection, maintenance and modification services; • nuclear component modification and replacement; • commercial…
• FY2025 10-K: …from operations or by raising additional capital through debt, equity or some combination thereof. Government Operations Through this segment, we engineer, design and manufacture precision naval nuclear components, reactors and nuclear fuel for the U.S. Department of Energy ("DOE")/National Nuclear Security…
• DRS (Leonardo DRS, Inc.)
• FY2025 10-K: …ship propulsion systems, motors and variable frequency drives, force protection systems, and transportation and logistics systems for the U.S. military and allied defense customers. DRS is a leading provider of next-generation electrical propulsion systems for the U.S. Navy. We provide power conversion, control,…
• FY2025 10-K: …and power generation and management are central to these priorities. Demand for our technologies is concentrated in areas of sustained priority for the DoW, including counter‑unmanned aircraft systems ("C-UAS"), advanced infrared sensing, network computing, and electric power and propulsion for next generation navy…
• KTOS (Kratos Defense & Security Solutions, Inc.)
• FY2025 10-K: …property and past performance qualifications and by offering a wider range of comprehensive low-cost technology leading and proven products and solutions compared to our competitors. In regard to areas of specialization, our product and solution offerings include the manufacturing of specialized defense electronics;…
• FY2025 10-K: …the U.S. Air Force (USAF), the U.S. Navy (USN), the U.S. Army, the U.S. Marine Corps (USMC), the U.S. Space Force, and the U.S. Space Command, and others. Additionally, Kratos customers also include the Defense Innovation Unit ("DIU") (formerly the Defense Innovation Unit Experimental ("DIUx")), Defense Advanced…
• CACI (CACI International Inc)
• FY2025 10-K: …omissions liability insurance may be inadequate to compensate us for all the damages that we might incur. Any such event could also cause serious damage to our reputation and prevent us from having access to or being eligible for further work on such sensitive systems for U.S. government customers. In addition, in…
• FY2025 10-K: …the government's satisfaction; • require us to disclose and certify cost and pricing data in connection with contract negotiations; and • require us to prevent unauthorized access to classified information, covered defense information, and controlled unclassified information. Our failure to comply with these or other…
• 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: …including subcontracts with other contractors engaged in work for the U.S. government. The Company disaggregates revenues by customer, contract type and prime versus subcontractor to the federal government for each of its reportable segments. Disaggregated revenues by customer were as follows: F-21 Table of Contents…
• BAH (BOOZ ALLEN HAMILTON HOLDING CORPORATION)
• FY2025 10-K: …support systems and provide services that include managing and protecting information involved in intelligence, national security, and other sensitive government functions. Our systems also store, process, and transmit sensitive Company and government and commercial customer information, including personally…
• 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…
• LHX (L3HARRIS TECHNOLOGIES, INC.)
• FY2025 10-K: …Demand We operate in highly-competitive markets that are sensitive to technological advances. Some of our competitors in each of our markets are larger than we are and can maintain higher levels of expenditures for research and development ("R&D"). We concentrate on the opportunities that we believe are compatible…
• FY2025 10-K: …our classified networks, and to the IT networks and related systems that we operate, maintain and secure for certain of our customers. We have implemented various measures to manage the risk of a security breach or disruption. See "Item 1C. Cybersecurity" in this Report for further discussion of our risk management…

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.