Leidos currently trades at $176.54 per share and has shown little upside over the past six months, posting a small loss of 1.4%. The stock also fell short of the S&P 500’s 5.1% gain during that period.
Does this present a buying opportunity for LDOS? Or is its underperformance reflective of its story and business quality? Find out in our full research report, it’s free.
Why Does Leidos Spark Debate?
Formed through the split of IT services company SAIC, Leidos (NYSE: LDOS) offers technology and engineering solutions such as military training systems for the defense, civil, and health markets.
Two Positive Attributes:
1. Surging Backlog Locks In Future Sales
In addition to reported revenue, backlog is a useful data point for analyzing Defense Contractors companies. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into Leidos’s future revenue streams.
Leidos’s backlog punched in at $49 billion in the latest quarter, and over the last two years, its year-on-year growth averaged 20.2%. This performance was fantastic and shows the company has a robust sales pipeline because it is accumulating more orders than it can fulfill. Its growth also suggests that customers are committing to Leidos for the long term, enhancing the business’s predictability. 
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Leidos’s EPS grew at 15.5% compounded annual growth rate over the last five years, higher than its 6.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
One Reason to be Careful:
Long-Term Revenue Growth Disappoints
A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Leidos’s sales grew at a mediocre 6.9% compounded annual growth rate over the last five years. This wasn’t a great result compared to the rest of the industrials sector, but there are still things to like about Leidos.
Final Judgment
Leidos’s positive characteristics outweigh the negatives. With its shares underperforming the market lately, the stock trades at 14.8× forward P/E (or $176.54 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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