Leidos Holdings LDOS
Technology · Information Technology Services · Synthos Deep Dive · 2026-07-03
The Overview
Leidos is a big contractor that builds and runs technology for the US government — the military, intelligence agencies, the FAA's air-traffic system, and federal health programs. About 90 cents of every revenue dollar comes from Uncle Sam.
The stock has been cut nearly in half over the past year because investors are scared Washington will cut spending on contractors like this one. That fear has made the stock genuinely cheap: you're paying about $10 for every $1 of annual profit, roughly half what the average stock costs, and the company generates a lot of spare cash. Management recently raised its forecast for the year, which is a good sign the business itself is holding up.
Our verdict is Buy — Tactical: a bargain worth owning for a bounce and the dividend, but not a "sleep forever" holding, because so much depends on government budgets.
Here's what our three scores mean in everyday terms:
- Downside Risk 4/10 (below average risk). The stock is cheap and doesn't swing wildly, which cushions you — but the company carries a fair amount of debt and lives or dies by federal budgets.
- Growth Quality 5/10 (middling). A solid, steady business that grows slowly — think low single digits, not fireworks.
- Exponential Potential 3/10 (low). This is not a rocket ship. It compounds slowly; don't expect it to double quickly on growth alone.
The one big worry: if Congress or a cost-cutting drive slashes federal contracting, Leidos's revenue and backlog take a direct hit — that is exactly the fear that already knocked the stock down.
Putting a number on it: our fair-value estimate is $138 against a current price of $140.66 — a premium price for a business we still like.
Our summary metrics
Cheap (9.9× EPS, 8.4× EV/EBITDA) & low beta 0.51 — but net-debt/EBITDA 2.7× and a −46% drawdown on federal-budget fear.
Only ~3-4% organic revenue & ~7% EPS CAGR; 14% EBITDA margin, 29% ROE (leverage-aided), backlog-backed but low-octane.
Government-services compounder, not an exponential — low single-digit top line, no acceleration, TAM already largely captured.
What does “fair value” mean?
Fair value is Synthos’s estimate of what one share is worth today, based on our model of the company’s future cash generation and the risks to it. It is not a price target or a prediction of where the stock trades next quarter — it’s the price where we think risk and reward are balanced. Above it, you’re paying for outcomes better than our base case; below it, the market is offering a margin of safety.
The model’s inputs and weightings are proprietary — they’re the product. What we publish is the output, plus an independent, public-math cross-check further down the page (“Check our number”) so you can judge it for yourself.
What do the 5 tiers mean? (Core · Tactical · Watch · Hold · Avoid)
Exponential Potential
Government-services compounder, not an exponential — low single-digit top line, no acceleration, TAM already largely captured.
What could take this further than the base case — and where the market may be underpricing it. Full forward-growth and acceleration math in Deeper analysis, §4 below.
Deeper analysis
Technicals, fundamentals, valuation, and the full expert-claim evidence panel — the detail behind the numbers above.
Reference table
| Street consensus | $174 (high $215 / low $110; 16 Buy · 11 Hold · 0 Sell) — context, not our anchor |
| Valuation | 9.9× trailing EPS · 9.2× FY26E · 8.8× FY27E · 7.5× FY29E · EV/S 1.2× · EV/EBITDA 8.4× · FCF yield ~13% |
| Technicals | Downtrend — $108.84, −46% off 52-wk high, below 50/200-DMA, RSI 32 (oversold), −32% 12-mo (SPY +21%) |
| Conviction | Low — 0 expert voices in KB; call rests on cheap valuation + backlog + raised management guidance |
| Position sizing | Small-to-moderate value/mean-reversion satellite, ~1–3% |
What the experts actually said
No independent expert claims in the Synthos knowledge base yet for LDOS — this dive is fundamentals- and technicals-driven, not panel-driven.
Price & moving averages 12 months · 50 & 200-day averages · 52-week range
Solid line = price · dashed line = 50-day average · dotted line = 200-day average · the two thin horizontal lines mark the 52-week high and low. Price above both averages is an uptrend.
Data summary: last close $140.66, 17% above the 50-day average ($120), 9% below the 200-day average ($155) — a mixed trend. 30% below the 52-week high of $200, 41% above the 52-week low of $100.
Bollinger Bands 20-day average ± 2 standard deviations
The shaded band widens when the stock gets more volatile. Riding the upper edge = strong momentum (sometimes stretched); the lower edge = weak / potentially oversold.
Data summary: price $140.66 is currently inside the band (band $125–$151).
RSI (14) momentum gauge · 0–100
Above 70 (overbought zone, shaded) = overbought, below 30 (oversold zone, shaded) = oversold. Currently 62.
MACD 12 / 26 / 9 · trend & momentum
The MACD line crossing above the signal line (bars flip to the up color) = momentum turning up; crossing below (bars flip to the down color) = turning down. Bar height = the size of that gap.
Data summary: MACD is currently below its signal line by 1.06, negative momentum.
Relative performance vs S&P 500 & its sector (XLK (sector)), set to 100 a year ago
Solid = LDOS · dashed = S&P 500 · dotted = XLK (sector). A rising line means it is beating that benchmark — the sector line shows whether it is a leader or laggard within its own group.
Forward revenue & earnings actual → estimate · "FY" = fiscal year, "E" = estimate
Darker bars = actual results, brighter = analyst estimates. Taller bars to the right = expected growth.
Key stats an RIA wants
1. What it is
Leidos Holdings (NYSE: LDOS) is a Reston, Virginia-based defense, intelligence, civil-government and health technology-services prime, founded in 1969, with ~47,000 employees. It delivers systems integration, software, cybersecurity, data analytics, air-traffic modernization and managed health programs, overwhelmingly to US federal customers (Department of Defense, the Intelligence Community, NASA, the FAA, and federal health agencies). Fiscal year ends in late December / early January.
Revenue mix (FY2025, from FMP segmentation — reporting-segment labels shifted over time, so treat FY25 as the current cut):
- By reportable segment (FY25): National Security Solutions $9.88B (57%) · Civil $5.05B (29%) · Defense Solutions $2.18B (13%). (Health results are now folded within the current segment structure; older filings broke out a standalone Health segment.)
- By geography: the business is ~90%+ US — the FY25 file shows only $1.40B tagged Non-US against a $17.2B base (FY24: US $15.2B vs Non-US $1.37B). This concentration is the defining structural feature: it is a stability strength (long-dated, mission-critical contracts, security clearances) and a policy risk (§11).
The strategic framing management uses is its "NorthStar 2030" plan — bolt-on M&A (the Entrust Solutions acquisition, an Analogic security-products JV), AI-enabled defense software, and what it calls "the second half of 2026 as the launchpad for multiyear growth acceleration" (management's own words — half-weighted; see §9).
2. The expert thesis — (none in KB)
There is no expert coverage of LDOS in the Synthos knowledge base: total_claims = 0, zero net-bullish voices. Unlike a conviction-track name, nothing here rests on distilled expert claims, and we will not manufacture any — fabricating conviction is against house standard, and there are no claim_id values to cite.
Accordingly, this verdict is fundamentals- and quant-driven only: cheap valuation, a $48B backlog, high free-cash conversion, low beta, and a raised management guide — weighed against federal-budget concentration and a low-growth ceiling. Read the scores in §3 and the risks in §11 as the whole of the case; there is no panel to defer to.
3. Synthos scores & the Bull / Base / Bear cases
The one-glance judgment — three scores, 0–10, each anchored to real metrics (not probabilities we can't honestly calibrate):
| Score | 0–10 | The read |
|---|---|---|
| Downside Risk (lower = safer) | 4 · Below-average | 9.9× trailing EPS, 8.4× EV/EBITDA and beta 0.51 give real valuation and volatility support; offset by net-debt/EBITDA 2.7× and a −46% drawdown that says the market is pricing a federal-budget hit, not just noise. |
| Growth Quality | 5 · Middling | FY25 revenue +3.1%; forward revenue CAGR ~3-4% and EPS CAGR ~7% ($11.22 → ~$14.6 by FY29E); 14% adj-EBITDA margin, 29% ROE (leverage-aided), backlog-backed but structurally low-octane. |
| Exponential Potential | 3 · Low | Government services do not compound exponentially; growth is low-single-digit and not accelerating. No multibagger runway from organic growth — the upside here is re-rating, not hyper-growth. |
The three cases (our own scenario model — assumptions shown; each target is a ~12–18-month fair value). We deliberately do not attach probabilities: the base case is by definition the expected path, so a weighted blend would just restate it with false precision. Instead the cases bound the range, and the scores above summarize them.
| Case | Key assumptions | Fair value |
|---|---|---|
| Bull | Budget fear fades; NorthStar 2030 M&A + AI-defense bookings reaccelerate organic growth to mid-single digits; FY27E EPS ~$12.5 re-rates to a ~14× government-prime multiple. | ~$178 (+64%) |
| Base (our anchor) | Guidance roughly holds — FY26 non-GAAP EPS ~$12.30 (mgmt guide), growing to FY27E ~$12.3; the stock re-rates only partway, to ~11× FY27E EPS. | ~$138 (+27%) |
| Bear | Federal budget / DOGE-style cuts bite; book-to-bill stays <1; organic growth stalls and EPS flatlines near ~$11; multiple stays depressed at ~8×. | ~$88 (−19%) |
Synthos fair value = the base case, ~$138 (+27%), with the full $88–$178 span as the honest range. Our base sits below the Street's $174 consensus — we are deliberately more cautious on the multiple given the budget overhang — while our bear roughly matches the Street's $110 low. This is a tracked call — the Forecaster Scorecard grades it once it matures.
4. Exponential Potential
Synthos separates compounders (durable returns on capital) from exponentials (accelerating multi-baggers-from-here). LDOS is a low-octane compounder, decisively not an exponential:
- Forward growth: revenue CAGR FY25→FY29E ~3.9% ($17.2B → ~$20.0B); EPS CAGR ~6-7% ($11.22 → ~$14.56) helped by buybacks (share count down ~132M → ~126M and falling).
- Acceleration (the 2nd derivative) is roughly flat, not positive: revenue growth was +3.1% (FY25) and consensus has it +0.6% (FY26E) → +5.5% (FY27E) → +4.7% (FY28E) → +4.8% (FY29E). Management's own pitch of "multiyear growth acceleration" starting H2'26 is the swing factor — but it is management's book, and consensus does not yet fully underwrite it. Per our flagship philosophy we buy forward next-exponentials over trailing compounders — LDOS is firmly a slow compounder, so it does not earn a flagship exponential slot.
- Room to run: at ~$13.7B market cap the name is small relative to the total federal-services addressable spend, but that TAM is largely already contested among a handful of primes — the constraint is budget dollars and win-rate, not runway. This is share-shift, not category creation.
- Reinvestment runway: modest, high-return — capex is tiny (~$125M/yr, <1% of revenue), so cash is returned via buyback/dividend and deployed into bolt-on M&A rather than an organic reinvestment flywheel.
Exponential Potential: Low (3/10). Own LDOS for cheapness, cash return and a possible re-rating — not for compounding growth. This honest framing is why it is a Tactical value satellite, not a Core or Degen holding.
5. Financials (real numbers — FMP annual/quarterly)
- Revenue: FY25 $17.17B, +3.1% (FY24 $16.66B, +7.9% on FY23 $15.44B). Steady, low-single-digit government top line.
- Quarterly trajectory: Q1'25 $4.25B → Q2 $4.25B → Q3 $4.47B → Q4 $4.21B → Q1'26 $4.40B (+3.6% YoY). Flat-to-slightly-up; no inflection yet.
- Margins: GAAP gross ~17.5% TTM; adjusted EBITDA margin ~14% (mgmt); operating ~12.2% TTM; net ~8.2% TTM. Stable, characteristic of a services prime.
- Earnings: FY25 net income $1.46B, GAAP EPS $11.22 (diluted $11.13) — up sharply from FY24's $9.36 as the business normalized off a weak FY23 ($1.45 EPS, a margin-reset year). Q1'26 GAAP EPS $2.56 / non-GAAP $3.13.
- Cash flow: FY25 operating CF $1.75B, capex only −$125M, FCF ~$1.63B — a ~13% FCF yield on market cap and 93% FCF/EBITDA conversion. This cash-generative, asset-light profile is the core of the value case.
- Balance sheet: total debt $5.93B, cash $1.20B, net debt ~$4.73B, net-debt/EBITDA ~2.7× — investment-grade (rating A-) and serviceable (interest coverage ~10×), but not a fortress; the Entrust deal added ~$1.4B of senior notes + commercial paper in Q1'26. Goodwill+intangibles ~$6.8B is ~50% of assets — acquisition-built.
6. Valuation — priced in or room?
LDOS is genuinely cheap on every trailing and forward measure: 9.9× trailing GAAP EPS, ~9× FY26E, ~8.8× FY27E, ~7.5× FY29E; EV/EBITDA 8.4×; EV/Sales 1.2×; P/FCF ~7×; FCF yield ~13%; P/B 2.7×. FMP's letter rating is A- (DCF score 5/5, ROE 5/5), dinged only on the debt-to-equity sub-score. The bull's case is simple: even flat mid-single-digit EPS growth plus a modest re-rating from ~9× toward a defense-prime-normal ~12–14× is a large total return, and you are paid ~1.6% dividend + heavy buyback to wait. The bear's case: the low multiple is deserved if federal budgets are cut — a services prime with ~90% government revenue can see backlog and win-rates deteriorate quickly, and 8× would then look generous. Street targets (context): consensus $174 (high $215, low $110; median $195; 16 Buy / 11 Hold / 0 Sell). Our $138 base sits deliberately below consensus because we discount the re-rating for budget risk. This is a cheap value/mean-reversion buy, not a growth buy.
7. Technicals (from the tech block)
- Trend: down. $108.84 sits below the 50-DMA ($125.0) and 200-DMA ($167.8), and the 50 is below the 200 (death-cross posture). MACD −6.9 (negative).
- Location: −45.5% off the 52-week high ($199.55) and only +8.8% off the 52-week low ($100.0) — a broken, deeply de-rated chart with a −46% max drawdown from peak.
- Momentum: RSI(14) 31.7 — near-oversold (<30 threshold), consistent with capitulation rather than an established uptrend.
- Relative strength (the tell): LDOS −32.4% 12-mo vs SPY +20.6% and QQQ +30.3%; −30% 3-mo vs SPY +14%. Severe, persistent underperformance of both the market and the Nasdaq.
- Read: technicals are weak and contradict the fundamental value case in the near term — this is a falling knife that is statistically cheap and oversold, which suits a patient value/mean-reversion entry (scale in, expect volatility) but offers no trend confirmation. A base above the 50-DMA (~$125) would be the technical all-clear.
8. Moat & competitive position
Leidos's moat is incumbency, scale and clearances, not technology exclusivity: a $48.4B backlog (Q1'26, ~1.1× TTM book-to-bill), thousands of cleared personnel, decades-long mission relationships (FAA air-traffic ERAM/ATOP, NSA/DISA cyber, DoD systems), and the switching costs of running classified, mission-critical systems. These are real but bounded — the customer is a monopsony (the US government) that controls the budget, recompetes contracts, and can insource or cut. Book-to-bill dipped to 0.8 in Q1'26 (though trailing-twelve-month was 1.1), a metric worth watching.
Peer set (FMP-supplied, market cap): the list is a broad IT-services group — Broadridge $16.6B, CDW $17.0B, Flex $50.1B, CGI (GIB) $14.4B, HP (HPQ) $20.1B, Gartner (IT) $9.1B, NetApp $30.2B, Teledyne (TDY) $30.2B, Wipro (WIT) $19.8B, Zoom (ZM) $25.6B. Note these are only loosely comparable — LDOS's truest peers are pure federal-services primes (Booz Allen, SAIC, CACI, GDIT/General Dynamics IT, Peraton), which are not in this FMP set; the listed group skews commercial-IT and should be read as a valuation-context basket, not direct competitors.
9. Management, capital allocation & guidance
- Leadership: CEO Thomas (Tom) Bell; CFO Christopher Cage. Strategy is the "NorthStar 2030" plan — organic mission-software/AI growth plus disciplined bolt-on M&A (Entrust Solutions closed Q1'26; an Analogic security-products JV signed).
- Capital allocation: shareholder-friendly and cash-funded — FY25 returned ~$944M in buybacks + ~$211M dividends (~$1.16B total, ~71% of FCF), share count falling (~132M → ~126M). Debt ticked up to fund Entrust. Dividend raised to $0.43/qtr (declared May 2026); TTM yield ~1.6%, payout only ~15% — well-covered.
- Insider activity: the sampled Form 4s are routine director/officer equity awards (A-Award grants at $0 cost dated 2026-06-30), not open-market buying or a cluster of discretionary selling — read as neutral compensation mechanics.
- Management's own guidance (the earnings-call track — half-weighted, self-interested by design): In the Q1'26 release (2026-05-05), Leidos raised full-year FY26 guidance: Revenue $18.00–$18.40B (up from $17.50–$17.90B), adjusted-EBITDA margin mid-13%, non-GAAP diluted EPS $12.10–$12.50 (up from $12.05–$12.45), and operating cash flow ~$1.80B (up from ~$1.75B). CEO Bell framed "the second half of 2026 as the launchpad for multiyear growth acceleration." This is a real earnings release (revenue, EBITDA, EPS, cash guidance), so we cite it — but it is management's own book, half-weighted; note the guided FY26 revenue ($18.0–18.4B) sits above the FMP analyst-consensus average (~$17.3B), i.e. management is more optimistic than the sell side.
10. Catalysts & what to watch
- Next earnings: 2026-08-04 (Q2'26; Street EPS $2.91, revenue ~$4.44B). Watch organic revenue growth and whether management reaffirms/raises the FY26 guide again.
- Book-to-bill & backlog: Q1'26 quarterly book-to-bill was 0.8 (TTM 1.1) — two consecutive sub-1 quarters would be a warning; a return above 1.1 supports the "acceleration" pitch.
- Federal budget / appropriations & DOGE-style efficiency drives: the single biggest macro swing factor for the whole sector.
- NorthStar 2030 execution: Entrust integration and the Analogic JV closing/contribution.
- Large recompetes and new awards: the release cited MACRO II ($869M), GSM-O II (~$461M), NSA TechSIGINT ($335M), SEC ISS2 (~$284M) — award cadence is the leading indicator.
Thesis tripwires (what would change the call): two consecutive quarters of book-to-bill <1.0 with declining backlog; a guidance cut citing budget cuts; organic revenue turning negative; or net-debt/EBITDA rising materially above ~3× from further M&A.
11. Key risks
- Federal budget concentration (structural, the #1 risk): ~90%+ US-government revenue means appropriations delays, continuing resolutions, shutdowns, or DOGE-style contract cuts hit revenue and backlog directly — this is precisely the fear behind the −46% drawdown.
- Growth ceiling: low-single-digit organic growth; the value case depends on a re-rating and buybacks, not compounding — limited if the multiple stays depressed.
- Leverage & M&A: net-debt/EBITDA ~2.7× and goodwill/intangibles ~50% of assets; acquisition-led strategy adds integration and balance-sheet risk (Entrust bumped debt).
- Recompete / margin risk: contracts are periodically recompeted; a lost prime or lower-price rebid can dent revenue and the ~14% EBITDA margin.
- No expert corroboration: with zero KB coverage, this call has no independent conviction backstop — it is quant/fundamental only, which argues for smaller sizing and tighter monitoring.
- Weak technicals: below both moving averages in a death-cross with negative relative strength — the market may know something not yet in the numbers.
12. Verdict, position sizing & monitoring
Buy — Tactical. LDOS is a cheap (9.9× EPS, 8.4× EV/EBITDA, ~13% FCF yield), low-beta (0.51), cash-generative government-services prime whose stock has been cut ~46% on federal-budget fear, while management raised full-year guidance — a value/mean-reversion setup with a ~+27% base-case upside to ~$138 and a paid-to-wait dividend. But it is not a Core holding: growth is low-single-digit, ~90% of revenue depends on US-government budgets, leverage is moderate, the chart is broken, and — critically — there is zero expert coverage in the Synthos KB, so conviction is structural-quant only.
- Sizing: small-to-moderate value satellite, ~1–3%. Scale in given the oversold, below-trend chart; do not lump.
- Monitoring: re-underwrite on the §10 tripwires; formal re-score at the 2026-08-04 Q2 print, watching organic growth, book-to-bill and any guidance change. This verdict is logged as a tracked Synthos call as of 2026-07-03 at $108.84.
- Single biggest risk: US federal budget / contract-cut policy — the concentration that makes LDOS defensive in normal times is the exact thing that could break the thesis.
Provenance & disclosures
- Traceability: 0 KB claims, breadth 0 — no expert coverage; this note is explicitly fundamentals- and quant-driven, and no
claim_ids are cited because none exist. Fabricated conviction is structurally impossible (claim-ID reconciliation) and none was invented here. - Data as-of: fundamentals 2026-04-03 (Q1'26) · estimates & prices 2026-07-02/03 · management guidance from the SEC 8-K/EX-99.1 earnings release dated 2026-05-05. Forward figures are analyst consensus (FMP) or management guidance, each labeled as estimates.
- Management caveat: the FY26 guidance in §9 is management's own, self-interested words, half-weighted by design; management's guided revenue runs above sell-side consensus.
- Not investment advice. Independent research, educational and informational only, never personalized. Hypothetical/forward figures are labeled; the only performance numbers Synthos will headline are the live, real-money Flagship's.
- Version: 2026-07-03. Prior versions available via the deep-dive version dropdown ("based on the info at the time").