Science Applications International Corporation (SAIC): what the price requires
The current priced-in claim for Science Applications International Corporation (SAIC) 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/SAIC
Headline
| Field | Value |
|---|---|
| Ticker | SAIC |
| Company | Science Applications International Corporation |
| Current price | $113.25/sh |
| Composition | Defense and Intelligence 77% / Civilian 23% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 5.6% |
| Operating margin today | 7.6% |
| Margin compression implied | -2.0pp |
| Multiple paid | 13x 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 6.8% sits below it).
Reconcile: at the x-ray's 9.3% required return this reads ~3.2%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.54σ |
| cohort percentile (of 177 peers) | 16 |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based 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.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.14x | 5 | expensive |
| Earnings | 1.27x | 5 | expensive |
| Relative | 0.34x | 5 | justifies |
| Growth | 0.94x | 3 | justifies |
Families that justify the price: Asset, Relative, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.4%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $120.45 | 0.94x | yes | FCF base $0.6B, growth -3% (input: historical growth), terminal g 0.5%, WACC 7.4%, 5yr projection |
| DCF Exit Multiple | Growth | $130.52 | 0.87x | yes | Exit EV/EBITDA: 8.3x / 10.3x / 12.3x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $244.97 | 0.46x | yes | P/E 25.92x (blended: static sector reference 35x + trailing (TTM) 12x), scenarios: 21.9x / 25.9x / 29.9x (bear / base = reference held flat / bull), EV/EBITDA 19.14x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $99.51 | 1.14x | yes | BV/sh $32.34, ROE (TTM) 28.5%, ke 9.3% |
| Two-Stage Excess Return | Asset | $178.52 | 0.63x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $66.32 | 1.71x | yes | Rev $7.3B, growth -3% (input: historical growth; tapered), Terminal P/S: 0.6x / 0.7x / 0.8x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $288.07 | 0.39x | yes | EPS $8.89, growth 32% (input: historical EPS growth), PEG=0.38 (Undervalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $82.14 | 1.38x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.57B × (1−21%) / WACC 7.4% → EPV (no growth) |
| Residual Income | Asset | $150.47 | 0.75x | yes | BV $32.34 + 5yr PV of (ROE (TTM) 28.5% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $80.43 | 1.41x | yes | √(22.5 × EPS $8.89 × BVPS $32.34) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $357.00 | 0.32x | yes | EBITDA $0.73B × sector EV/EBITDA 25.0x |
| FCF Yield | Earnings | $89.25 | 1.27x | yes | FCF $603.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $74.01 | 1.53x | yes | SBC-adj FCF $0.54B (FCF $0.60B − SBC $0.06B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $286.85 | 0.39x | yes | EPS $8.89 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $15.47 | 7.32x | yes | BV $32.34 × (ROIC 3.5% / WACC 7.4%) |
| P/Sales Sector | Relative | $1325.64 | 0.09x | yes | Revenue $7.29B × sector P/S 8.0x |
| PEG Fair Value | Relative | $333.38 | 0.34x | yes | EPS $8.89 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $96.11 | 1.18x | yes | EPS $8.89 / 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 | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $2.4b |
| Net debt / NOPAT (after-tax) | 5.29x |
| Net debt / operating income (pre-tax) | 4.19x |
| Share count CAGR (buyback) | -6.1% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- At about $101.96 the market pays roughly 12x company-wide operating income, a multiple so low it sits below what even a 5%-a-year operating-profit decline would warrant. The price is not asking for growth, it is barely pricing in continuation.
- Return on equity is about 28.5% against a 9.3% cost of equity, and the company is shrinking its share count roughly 6% a year through buybacks. A high-return business bought back at a low multiple is the value setup the numbers describe.
- The offset is leverage and end-market risk: net debt near $2.4 billion, about 4x operating income, against a contractor whose revenue depends almost entirely on U.S. government budgets and contract recompetes.
Bull Case
The single most decisive number here is the multiple itself: the market pays about 12x company-wide operating income, low enough that the price sits below what even a 5%-a-year operating-profit decline would justify. Flip that one metric, demand a normal services multiple instead of a declining-business multiple, and the entire verdict changes. The price is essentially pricing SAIC as a melting ice cube, yet the business is not melting. Revenue rose 2% to $1.88 billion in the first quarter of fiscal 2026 and again to $1.91 billion in the first quarter of fiscal 2027, with net bookings near $2.1 to $2.4 billion and a book-to-bill above 1.0, meaning the company is winning more work than it burns off (web research). A book-to-bill over 1.0 with a backlog near $22.9 billion is the opposite of decline.
The return profile is what makes the low multiple a genuine value signal rather than a trap. The same high return shows up in the cash: free cash flow capitalized at the cost of equity marks about $89, the earnings-yield method $96, and the two-stage excess-return method $178. Across the asset and earnings-power families the price is supported or cheap, which is why the characterization reads as an asset-and-earnings-power value name rather than a growth bet.
Management is allocating capital exactly as a value investor would want. The share count is shrinking about 6% a year, so per-share earnings rise even on flat revenue, and the buyback is being funded at a 12x multiple, which compounds shareholder value when the underlying return on equity is near 28%. The recent quarter underlined the operating progress: adjusted EBITDA margin improved to 11.6% of revenue from 8.4% a year earlier on better contract mix and lower overhead, and the company raised its fiscal 2027 earnings outlook (web research). A high-return government-services franchise winning new work, expanding margin, and retiring shares at a low multiple is a coherent value case, and the price is paying for almost none of it.
Bear Case
The qualitative reason the market keeps SAIC cheap is concentration in a single, politically governed customer. This is a U.S. government contractor, with defense and intelligence work about 77% of revenue and civilian agencies the rest, so the entire top line rises and falls with federal appropriations and procurement cycles. The FY2025 10-K names the exposure directly, warning that "reduced U.S. government defense spending" and similar pressures could harm the ability to keep "winning new work, and growing our revenues" (accession 0001571123-25-000022). A budget impasse, a continuing resolution, a shift in administration priorities, or a contract protest can each defer revenue the business has nominally booked. The market discounts that political beta with a low multiple, and it is not wrong to: the cash flows are real but the timing is outside the company's control.
Only after the qualitative picture do the numbers reinforce the caution. Growth is barely positive, around 2% organically, so the per-share story leans heavily on buybacks rather than the business compounding. The backlog the bull case cites is itself contingent: the 10-K explains that funded backlog "primarily represents estimated amounts of revenue to be earned in the future from contracts for which funding is appropriated," and that most contracts carry cancellation terms that let the customer end work early (accession 0001571123-25-000022). Backlog is a pipeline, not a guarantee. A book-to-bill that slips below 1.0 in a tighter budget environment would remove the one clear sign the franchise is still growing.
Leverage is the financial pressure point. Net debt is about $2.4 billion, roughly 4x trailing operating income, and interest expense is not even separately reported, so coverage cannot be cleanly computed. That debt is manageable while the government keeps paying on schedule and free cash flow stays near $600 million, but it removes flexibility in a downturn, and it competes with the buyback for the same cash. The price-to-fundamentals gap is real, residual income at $150 against a $102 (June 28, 2026) quote, but the discount exists because the market is paying for a high-return business whose single customer can change the spending environment with a vote, and whose balance sheet leaves limited room if that environment turns.
Valuation
The price is read on a whole-company basis against operating income, and the read is unusual: at roughly 12x operating income the multiple is low enough that the inversion is a bound rather than a solved growth rate. The price sits below what even a 5%-a-year operating-profit decline would warrant, computed at a 7% cost of capital (the model's floor, above the 6.7% CAPM rate). In plain terms, the market is pricing in continued contraction, and the company is not contracting.
The X-ray is lopsidedly supportive. The asset and earnings-power families are more grounded and still favorable: residual income $150, two-stage excess return $178, simple excess return $100, earnings-power value $85, FCF yield $89, earnings yield $96, the Graham number $80. Return on equity near 28.5% drives the excess-return marks above book value of $32.34. The blended mark across the consensus methods is about $151. The fair-value range is pinned at the current price because the inversion floored, which is the model's way of saying the price is at or below the bottom of its plausible band.
The honest summary is that SAIC screens as a high-return, cash-generative government-services business trading at a multiple that assumes decline. The variable that decides whether the discount closes is the federal-budget environment: steady or rising defense and civilian spending lets the buyback and margin gains compound the value, while a budget squeeze validates the market's caution.
Catalysts
The most recent print is the clearest catalyst that the business is improving, not declining. For the quarter ended May 1, 2026, SAIC reported revenue of $1.91 billion, net income of $115 million, diluted EPS of $2.61 and adjusted diluted EPS of $3.23, with adjusted EBITDA margin up to 11.6% of revenue from 8.4% a year earlier on better contract mix, lower SG&A, and a $12 million investment gain, and the company raised its fiscal 2027 earnings outlook (web research). Margin expansion of that size on a government contractor is the swing factor for the per-share story.
Bookings and backlog are the forward indicators. Net bookings were roughly $2.1 billion in the latest quarter for a book-to-bill of about 1.1, on top of about $2.4 billion and a 1.3 ratio a year earlier, with estimated backlog near $22.9 billion (web research). Each quarter's book-to-bill is the readout on whether new awards keep outpacing work delivered, the single signal that separates a growing franchise from a melting one.
The external catalyst that governs everything is the federal budget cycle. Revenue depends on appropriations and procurement timing, so continuing resolutions, defense-spending decisions, and contract recompetes are the events that move the thesis. Watch the quarterly book-to-bill, the trajectory of adjusted EBITDA margin, the pace of the share buyback, and any shift in the defense and civilian budget environment.
Sources: SAIC first quarter fiscal 2027 results (globenewswire.com, finance.yahoo.com, govconwire.com); SAIC first quarter fiscal 2026 results (saic.gcs-web.com, govconwire.com); SAIC Q1 earnings transcript (fool.com).
Peer Cohorts (Per Segment, With Filing Citations)
Defense and Intelligence (reported)
- LDOS (Leidos Holdings, Inc.)
- (no filing in the citation store)
- CACI (CACI International Inc)
- (no filing in the citation store)
- BAH (BOOZ ALLEN HAMILTON HOLDING CORPORATION)
- (no filing in the citation store)
- KD (Kyndryl Holdings, Inc.)
- (no filing in the citation store)
- PSN (Parsons Corporation)
- (no filing in the citation store)
- KBR (KBR, Inc.)
- (no filing in the citation store)
Civilian (reported)
- LDOS (Leidos Holdings, Inc.)
- (no filing in the citation store)
- CACI (CACI International Inc)
- (no filing in the citation store)
- BAH (BOOZ ALLEN HAMILTON HOLDING CORPORATION)
- (no filing in the citation store)
- KD (Kyndryl Holdings, Inc.)
- (no filing in the citation store)
- PSN (Parsons Corporation)
- (no filing in the citation store)
- ACN (Accenture plc)
- (no filing in the citation store)
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.
- 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.