r/stocks
Leidos Holdings LDO - UnderValued??
Author argues LDO is undervalued at ~10x forward PE, citing strong earnings beats, a $48.4B backlog, raised guidance, and buybacks.
- Massive $48.4B backlog provides years of secure government revenue visibility, exceeding 3x its market cap.
- Strong financial performance with revenue and EPS beats, leading to raised FY2026 guidance.
- Trades at a low valuation of ~10x forward earnings despite being a top DoD IT provider, plus $200M share buyback.
What am I missing here? Seems undervalued and also on an insane growth trajectory on all cylinders????
Revenue: $4.40B (Up 4% year-over-year, beating analyst consensus).
Adjusted EPS: $3.13 (A massive beat against the $2.90 Wall Street estimate).
Adjusted EBITDA Margin: 14% ($614M).
The Backlog: $48.4 Billion. Read that number again. Their current backlog is more than 3x their entire market cap. That is years of highly secure, contracted government revenue visibility.
Management's Response: They were so confident that they raised full-year FY2026 guidance.
They are now projecting:
Full-year Revenue:
$18.0B – $18.4B (Up $500M from previous guidance).
Full-year Non-GAAP EPS: $12.10 – $12.50.
Operating Cash Flow: \~$1.8B.
\~10x forward earnings, the market is pricing Leidos like a dying brick-and-mortar retail business, not the largest primary IT provider to the US Department of Defense.
High-Value Wins: In May alone, they secured a massive $2.7B hypersonic weapons production contract. Their newly acquired Kudu Dynamics integration also drove their total cyber pipeline up 21% to $24B.
Capital Return: They aggressively bought back $200M of their own stock in Q1.
I'm confused on how 4% revenue growth is an "Insane growth trajectory".
Backlog/EV is a strange metric. Most defense contractors have a larger backlog than market cap.
Lots of sensationalist language here. You seem to be missing that 4% revenue growth on 8% net margins is unimpressive.
They raised their FY guidance to 4.8% - 7.1%. This does not include the 2.7 Billion hypersonic win that came after earnings.
Their net margins were down due to the one time acqusition costs to Entrust deal which will be used to scale their operations. Not a NVIDIA by all means, but their forward P/E and balance sheet makes their current share price activity questionable compared to something like SpaceX.
The name is short for ka-leidos-cope and for that reason I’m buying.
yes. it’s undervalued
buying .
I would be careful with backlog as a headline metric. Backlog quality matters: margin on the contracts, timing of revenue recognition, recompete risk, cancellation risk, and whether growth is organic or from one-off awards.
A company can look cheap on backlog/market cap and still deserve the multiple if margins, cash conversion, or growth durability are weaker than the headline suggests.