Parsons Corporation (PSN): what the price assumes
In the published model solve dated 2026-Q2, anchored at $47.77, Parsons Corporation (PSN) is priced for -2.4% 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 2026-06-27.
Generated: 2026-08-10 · Exported: 2026-08-12 · Source: https://boothcheck.com/report/PSN
Headline
| Field | Value |
|---|---|
| Ticker | PSN |
| Company | Parsons Corporation |
| Current price | $47.78/sh |
| Composition | Fixed-Price 34% / Time-and-Materials 24% / Cost-Plus 42% |
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) | 1.1% |
| Operating margin today | 6.4% |
| Margin compression (value-band) | -5.3pp |
| Implied growth | -2.4% |
| Multiple paid | 16x operating income |
The operating-margin figure is value-band context at year 10: 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; each 1pp of cost of capital moves the implied operating-profit growth ~6.9pp.
Reconcile: at the x-ray's 9.3% required return this reads ~9.7%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.71σ |
| cohort percentile (of 187 peers) | 18 |
| implied end-window share | 0% |
Valuation X-Ray
Every valuation family lands below the price. The price therefore sits beyond what those standard frames encode.
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 | 2.18x | 5 | expensive |
| Earnings | 2.04x | 4 | expensive |
| Relative | — | 0 | — |
| Growth | 1.45x | 3 | expensive |
Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.2%); the inversion above states its own rate.
Per-Model Detail (n=12)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $32.87 | 1.45x | yes | FCF base $0.4B, growth -7% (input: historical growth), terminal g 0.5%, WACC 7.2%, 5yr projection |
| DCF Exit Multiple | Growth | $49.71 | 0.96x | yes | Exit EV/EBITDA: 10.4x / 12.4x / 14.4x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | — | — | no | P/E 35x (static sector reference · 2026-04), scenarios: 29.6x / 35.0x / 40.4x (bear / base = reference held flat / bull), EV/EBITDA 19.96x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $22.73 | 2.10x | yes | BV/sh $24.44, ROE (TTM) 8.6%, ke 9.3% |
| Two-Stage Excess Return | Asset | $21.91 | 2.18x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $24.20 | 1.97x | yes | Rev $6.3B, growth -7% (input: historical growth; tapered), Terminal P/S: 0.7x / 0.8x / 0.9x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $18.56 | 2.57x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.30B × (1−20%) / WACC 7.2% → EPV (no growth) |
| Residual Income | Asset | $21.78 | 2.19x | yes | BV $24.44 + 5yr PV of (ROE (TTM) 8.6% − Kₑ 9.3%) × BV; BV grows 5.6%/yr |
| Graham Number | Asset | $33.90 | 1.41x | yes | √(22.5 × EPS $2.09 × BVPS $24.44) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | — | — | no | EBITDA $0.53B × sector EV/EBITDA 25.0x |
| FCF Yield | Earnings | $28.74 | 1.66x | yes | FCF $417.1M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $24.41 | 1.96x | yes | SBC-adj FCF $0.37B (FCF $0.42B − SBC $0.04B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $1.75 | 27.30x | yes | EPS $2.09 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | $6.47 | 7.38x | yes | BV $24.44 × (ROIC 1.9% / WACC 7.2%) |
| P/Sales Sector | Relative | — | — | no | Revenue $6.30B × sector P/S 8.0x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $22.59 | 2.11x | yes | EPS $2.09 / 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 |
|---|---|---|---|---|---|---|
| Federal Solutions | operating | enterprise | $3.2b | — | withheld | unresolved no unit value |
| Critical Infrastructure | operating | enterprise | $3.1b | — | 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 | $1.2b |
| Net debt / NOPAT (after-tax) | 3.82x |
| Net debt / operating income (pre-tax) | 3.06x |
| Interest coverage | 7.3x |
| Share count CAGR (buyback) | -1.1% |
| Burning cash | no |
Bullet Takeaways
- At about $52 the price implies essentially flat operating income, roughly minus half a percent a year. That is a low bar for a defense and infrastructure firm posting record backlog and record margins, and the reverse-DCF fair band centers well above the current price.
- The first quarter of 2026 was strong beneath a noisy headline: EPS of $0.79 beat estimates, total backlog hit a record $9.3 billion, and the book-to-bill ratio was 1.4 times. Reported revenue fell only because a large confidential contract rolled off; excluding it, revenue grew.
- Leverage is moderate, with net debt about three times operating income and interest coverage above seven times. The split between Federal Solutions and Critical Infrastructure gives the company two distinct demand engines.
Bull Case
The loudest worry on Parsons is the headline revenue decline, so confront it first. First-quarter 2026 revenue of $1.5 billion was down 4% year over year, which looks like a stalling business until you see why. A single large confidential contract rolled off; excluding it, total revenue rose 8% and organic revenue grew 3%. Federal Solutions revenue grew 12% excluding that contract, driven by demand for cyber, electronic warfare, and space capabilities. So the data undercuts the fear: the underlying business is growing, and the decline is an artifact of one program ending. EPS of $0.79 beat the estimate, adjusted EBITDA margin expanded to a record 10.1%, and total backlog reached a record $9.3 billion. That is not a company in retreat.
The order book is the strongest part of the case. The book-to-bill ratio was 1.4 times in both segments, and the Critical Infrastructure business has now posted 22 consecutive quarters of book-to-bill above 1.0. A book-to-bill consistently above one means new awards are coming in faster than revenue is recognized, which is the leading indicator of future growth for a project business. The 10-K frames the segment dynamics around "the timing and size of the awards issued by our customers" (FY2025 10-K, accession 0001193125-26-045495), and the recent awards keep arriving: post-quarter the company booked $400 million in Other Transaction Agreements, a new classified contract, and a ceiling increase on a national security prime contract.
The valuation makes the setup attractive. The price implies essentially flat operating income, yet the company is growing organically, expanding margins, and sitting on record backlog. The reverse-DCF fair band centers above $117, far above the current $52 (June 27, 2026), which says the market is pricing almost no growth into a business with a strong order pipeline. The two segments contribute roughly evenly to earnings, with Federal Solutions and Critical Infrastructure together making up the EBITDA base in a 46% and 54% split (accession 0001193125-26-045495), giving Parsons exposure to both national-security spending and the infrastructure investment cycle. For a company this well-positioned, paying a price that assumes stagnation is the core of the bull thesis.
Bear Case
The fragile assumption baked into Parsons is that its government revenue keeps flowing smoothly, and that is exactly the assumption most exposed to forces outside the company's control. The first-quarter revenue decline, even if driven by one confidential contract rolling off, is a live reminder of the risk: large government programs end, get recompeted, or get cut, and when they do the revenue disappears in a lump. A book-to-bill above one is encouraging, but backlog is not cash, and the conversion of that $9.3 billion into revenue depends on funding decisions, appropriations timing, and the pace at which customers issue task orders. A defense and infrastructure contractor lives and dies by the federal budget cycle.
The contract economics carry their own hazard. Parsons takes on fixed-price work where, as the 10-K explains, the company "receive[s] the full benefit of any cost savings, but they also generally involve greater financial risk because we bear the risk of any cost overruns" (FY2025 10-K, accession 0001193125-26-045495). On large, multi-year engineering projects, a cost overrun can erase the margin on a whole contract, and the record 10.1% margin posted in the first quarter is a high-water mark that sets a tough comparison. If a few projects run over, the margin story that is currently supporting the stock reverses.
The valuation frames are more cautious than the bull narrative allows. The asset-based, earnings-power, and growth-DCF frames all read the price as expensive on current economics; only the relative-multiple frame justifies it. That is a thin base of support, and it depends on the market continuing to award defense-services peers a premium multiple. Net debt near three times operating income is manageable but not trivial, and the business has grown partly through acquisition, which adds integration risk and goodwill. The bear case is not that Parsons is a bad business; it is that the price assumes uninterrupted execution and funding, and government-dependent businesses rarely deliver uninterrupted anything.
Valuation
Parsons is priced conservatively relative to its own results, which is what makes the valuation interesting. At about $52 the stock is roughly 17 times trailing operating income, which inverts to operating income growth of about minus half a percent a year over five years. In other words, the price assumes the business essentially flatlines. Against a company posting record backlog, a 1.4 times book-to-bill, and record margins, that is a low bar, and the overall priced-in level reads as within range rather than stretched.
The family pattern is mixed and worth reading carefully. The relative-multiple frame supports the price, while the asset-based, earnings-power, and growth-DCF frames read it as expensive on current economics. The reasonable-growth band built from the inversion is unusual here: it runs from a low near $81 to a base and high at about $117, both well above the current price. The current operating margin of 6.4% leaves room for the margin expansion the company has been delivering to add value.
The honest framing is that the methods see more value than the price reflects, provided the order book converts. The risk is concentration and execution rather than solvency, since leverage is moderate and coverage is comfortable. A buyer at this price is underwriting that Parsons keeps converting its record backlog into revenue at healthy margins, and is being paid to take the government-funding and cost-overrun risk that comes with the territory. If the conversion happens, the reverse-DCF says there is meaningful room between the price and fair value; if it stalls, the relative-multiple support is the only floor.
Catalysts
The recent quarter set a constructive tone despite a noisy headline. First-quarter 2026 EPS of $0.79 beat the $0.69 estimate, even as revenue of $1.5 billion slipped 4% on the roll-off of a large confidential contract; excluding that contract, total revenue rose 8% and Federal Solutions grew 12%. Total and funded backlog reached records of $9.3 billion and $6.6 billion, the book-to-bill ratio was 1.4 times in both segments, and adjusted EBITDA margin expanded to a record 10.1%. Management reiterated full-year 2026 guidance. The next earnings reports are the checkpoints for whether organic growth reaccelerates as the confidential contract comparison eases.
The award flow is the catalyst to watch. Demand for cyber, electronic warfare, and space capabilities is driving Federal Solutions, and Critical Infrastructure has posted 22 consecutive quarters of book-to-bill above 1.0. Post-quarter the company added $400 million in Other Transaction Agreements, a new single-award classified contract with a $184 million ceiling, and an $87 million ceiling increase on a national security prime contract. Each large new award supports the conversion of backlog into future revenue, so the cadence of bookings is the leading indicator for the stock.
The risks run through the budget and the project ledger. Federal funding decisions, appropriations timing, and the pace of task orders all affect how quickly backlog becomes revenue. Fixed-price contracts carry cost-overrun risk that can hit margins on individual projects, and the record margin sets a high bar to repeat. A government shutdown, a program cut, or a stumble on a large project would each weigh on a stock whose price already assumes little growth but whose recent strength has raised expectations.
Peer Cohorts (Per Segment, With Filing Citations)
Federal Solutions (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: …from offerings including space and maritime; energy infrastructure; digital modernization and cyber; mission software; and managed health services, primarily with the U.S. government and its agencies. We also serve various state and local governments, foreign governments and commercial customers. We perform under…
- SAIC (Science Applications International Corporation)
- FY2025 10-K: …by customers and partners. Repeatable Methodologies and Certified Processes. Our technical excellence is driven by our proven, repeatable, disciplined processes for management, engineering, technical support and services. We deploy our tools and processes enterprise-wide and emphasize a consistent approach to…
- FY2025 10-K: , we leverage our expertise and scale to help them execute their mission. We succeed as a business based on the solutions we deliver, our past performance, and our ability to compete on price. Our solutions are inspired through innovation based on adoption of best practices and technology integration of the best…
- CACI (CACI International Inc)
- FY2025 10-K: …and speed of delivery. We believe that our customers' use of lowest price/technically acceptable (LPTA) procurements, which contributed to pricing pressures in past years, has moderated, though price still remains an important factor in procurements. We also continue to see protests of major contract awards and…
- 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…
- BAH (BOOZ ALLEN HAMILTON HOLDING CORPORATION)
- 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…
- 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…
- KTOS (Kratos Defense & Security Solutions, Inc.)
- FY2025 10-K: …For the years ended December 28, 2025 and December 29, 2024, the Company recognized revenue of $ 64.7 million and $ 85.8 million, respectively, that was previously included in the beginning balance of contract liabilities. Disaggregation of Revenue The following series of tables presents the Company's revenue…
- FY2025 10-K: …& Security Solutions, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Kratos Defense & Security Solutions, Inc. and subsidiaries (the "Company") as of December 28, 2025 and December 29, 2024, the related…
- LHX (L3HARRIS TECHNOLOGIES, INC.)
- FY2025 10-K: …segment recognizes a profit that is eliminated. The elimination of intersegment revenues is included in the "Intersegment" line item in Note 14: Business Segments in these Notes. Corporate expenses are primarily allocated to our business segments using an allocation methodology prescribed by U.S. Government…
- FY2025 10-K: …applications. As of January 2, 2026, we had approximately 45,000 employees, including approximately 18,000 engineers and scientists. We structure our operations primarily around the capabilities we provide and we report our financial results in four business segments: CS, SAS, IMS, and AR. Revenue is disaggregated at…
- BWXT (BWX Technologies Inc)
- FY2025 10-K: …to continuing reviews by governmental agencies in Canada, including the CNSC. The NRC's decommissioning regulations require our Government Operations segment to provide financial assurance that it will be able to pay the expected cost of decommissioning its two licensed facilities at the end of their service lives.…
- FY2025 10-K: …In addition, this segment offers in-plant inspection, maintenance and modification services for nuclear steam generators, heat exchangers, reactors, fuel handling systems and balance of plant equipment, as well as specialized non-destructive examination and tooling/repair solutions. This segment also offers a broad…
- DRS (Leonardo DRS, Inc.)
- 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…
- FY2025 10-K: Wright Street, Madison, WI Manufacturing, Engineering, Office Advanced Sensing and Computing 32,319 Leased 651 Anchors Street, Ft. Walton Beach, FL Manufacturing, Engineering, Office Advanced Sensing and Computing 31,783 Owned 1620 Old Airport Road, West Plains, MO Distribution, Warehouse Integrated Mission Systems…
Critical Infrastructure (reported)
- ACM (AECOM)
- FY2025 10-K: …and courthouses and other public buildings, as well as energy conservation systems for utilities. • Transmission and Distribution. Power stations and electric transmissions and distribution and cogeneration systems. • Alternative/Renewable Energy. Production facilities such as ethanol plants, onshore and offshore…
- FY2025 10-K: …response exercises with key stakeholders. To manage risks associated with third-party service providers, we typically perform a cybersecurity assessment on new vendors before they are onboarded as a supplier. We conduct periodic reviews of these vendors to evaluate continued compliance with our policies and…
- J (JACOBS SOLUTIONS INC.)
- FY2025 10-K: …and reporting from information security professionals, many of whom have decades of experience and hold certifications such as a Certified Information Systems Security Professional (CISSP) or Certified Information Security Manager (CISM). These efforts are supported by advanced technological tools, specialized…
- FY2025 10-K: Institute of Standards and Technology ("NIST") Cybersecurity Framework ("CSF") and the International Organization for Standardization ("ISO") 27001 Information Security Management System Requirements. Cybersecurity is an important and integrated part of our enterprise risk management program that identifies, monitors…
- TTEK (TETRA TECH, INC.)
- FY2025 10-K: …from macro-level planning and management advisory services to project-specific environmental, engineering, project management and operational services, and advising on energy security and the design and implementation of smart grids, both domestically and internationally, including increasing utility automation,…
- FY2025 10-K: …and cloud migration. We design solutions to manage and analyze data for major federal agency programs including data related to health, security, environment and water programs. We provide technical support for the Federal Aviation Administration to optimize the U.S. airspace system and support for related aviation…
- FLR (FLUOR CORPORATION)
- FY2025 10-K: …we might experience, including losses from delays in our ability to provide services to our customers, reputational harm or the costs to improve security against future similar threats or losses arising from the computing environments and systems managed by others. Systems and IT interruption, as well as new systems…
- FY2025 10-K: …on new awards. • The nature of our contracts, particularly our lump-sum contracts, subject us to risks associated with delays and cost overruns, which may not be fully recoverable and may result in reduced profits or losses that could have a material impact on us. • Intense competition in the EPC industry can impact…
- STRL (Sterling Infrastructure, Inc.)
- FY2025 10-K: …E-Infrastructure Solutions business is driven by our customers' investments in the development of data centers, advanced manufacturing centers, e-commerce distribution centers and warehouses. We foresee significant growth opportunities tied to the implementation of multi-year capital deployment plans by data center…
- FY2025 10-K: …in response to market and other factors, including the other factors discussed in "Risks Factors," variations in our quarterly operating results from our expectations or those of securities analysts or investors, downward revisions in securities analysts' estimates, and announcements by us or our competitors of…
- GVA (GRANITE CONSTRUCTION INC)
- FY2025 10-K: …various roles in information technology and information security for over 25 years, including serving as the Head of Cybersecurity for public and private companies. Our CTO holds an undergraduate degree in computer science and has attained a professional certification in Cybersecurity Governance. The Cybersecurity…
- FY2025 10-K: …gva:ConsolidatedConstructionCorporateJointVentureMember srt:MinimumMember 2025-01-01 2025-12-31 0000861459 us-gaap:VariableInterestEntityPrimaryBeneficiaryMember gva:ConsolidatedConstructionCorporateJointVentureMember srt:MaximumMember 2025-01-01 2025-12-31 0000861459…
- PRIM (Primoris Services Corporation)
- FY2025 10-K: …processing and maintenance of the information processed by these systems and products, is critical to our business operations and strategy. Further, customers supplying us their data rely on the security of our infrastructure and systems, including hardware, software and other elements provided by third parties, to…
- FY2025 10-K: …demand based on information from our customers. Fixed and MSA Backlog by reporting segment for the periods ending December 31, 2025 and 2024 were as follows (in millions): December 31, 2025 December 31, 2024 Next 12 Months Total Next 12 Months Total Utilities …
- EME (EMCOR Group, Inc.)
- FY2025 10-K: …Consequently, changes in estimates, or variations of actual results from previous projections, on an unusually large project, or on a number of average size projects, could be material and could have an adverse impact on our financial condition, results of operations, and cash flows. We are increasingly dependent on…
- FY2025 10-K: 105634 us-gaap:OperatingSegmentsMember eme:CommercialSiteBasedServicesMember country:US eme:UnitedStatesBuildingServicesMember 2025-01-01 2025-12-31 0000105634 us-gaap:OperatingSegmentsMember eme:CommercialSiteBasedServicesMember country:US eme:UnitedStatesBuildingServicesMember 2024-01-01 2024-12-31 0000105634…
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.