Option FanaticOptions, stock, futures, and system trading, backtesting, money management, and much more!

SAIC Stock Study (11-21-25)

Posted by on April 21, 2025 at 07:01 | Last modified: November 21, 2025 10:48

I recently did a stock study on Science Applications International Corp. (SAIC, $85.01).

M* writes:

     > Science Applications International Corp provides technical,
     > engineering, and enterprise IT services mainly to the U.S.
     > government. Specifically, it offers end-to-end solutions
     > spanning the design, development, integration, deployment,
     > management and operations, sustainment, and security of the
     > customer’s entire IT infrastructure. The company has two
     > reportable segments which include Defense and Intelligence and
     > the Civilian segment. Maximum revenue is generated from its
     > Defense and Intelligence segment, which provides a diverse
     > portfolio of national security solutions to the Department
     > of Defense (DoD) and the Intelligence Community of the U.S.
     > Government. The Civilian segment provides solutions to civilian
     > markets, encompassing federal, state, and local governments.

Over the past decade, this medium-size company has grown sales and earnings at annualized rates of 8.1% and 12.4%, respectively [references to year from Value Line (VL) and BI website incremented by 1 to align with FY ending Jan 31]. Lines are mostly up, straight, and parallel except for a sales dip in ’24 and EPS dips in ’19, ’21, and ’25. Five- and 10-year EPS R^2 are 0.81 and VL gives an Earnings Predictability score of 95.

Over the past decade, PTPM lags peer and industry averages while ranging from 3.6% in ’19 to 8.3% in ’24 with a last-5-year mean of 5.5%. ROE slightly leads peers and the industry while ranging from 13.8% in ’21 to 53.4% in ’18 with a last-5-year mean of 18.8%. Debt-to-Capital is greater than peer and industry averages despite falling from 73.8% (’16) to 60.3% (’25) with a last-5-year mean of 60.5%.

Quick Ratio is 0.69 and Interest Coverage 4.5 per M* who gives a C grade for Financial Health (per BI website). VL gives a B+ grade for Financial Strength.

With regard to sales growth:

My flat forecast is about middle of the range.

With regard to EPS growth:

My flat growth forecast is below the long-term-estimate range (mean of two: 3.8%). Initial value is ’25 EPS of $7.17/share (down 19.3% YOY) rather than 2026 Q2 EPS of $8.26 (TTM).

My Forecast High P/E is 18.0. Over the past 10 years, high P/E ranges from 15.3 in ’24 to 30.0 in ’19 with a last-5-year mean of 21.8 and a last-5-year-mean average P/E of 17.8. I am near bottom of the range (only ’24 is less).

My Forecast Low P/E is 9.0. Over the past 10 years, low P/E ranges from 18.7 in ’19 to 10.7 in ’24 with a last-5-year mean of 13.8. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $64.50 is default based on initial value given above. That is 24.1% less than the previous close and 23.9% less than the 52-week low.

Over the past 10 years, Payout Ratio (PR) decreases from 49.0% to 29.6% (’25) with a last-5-year mean of 27.5%. I am forecasting below the range (16.7% in ’24) at 16.0%.

These inputs land SAIC in the HOLD zone with a U/D ratio of 2.1. Total Annualized Return (TAR) is 9.6%.

PAR (using Forecast Average–not High–P/E) of 3.8% is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors this study, then I can focus on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 13 studies done in the past 90 days (five outliers including my study excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 3.5%, 5.6%, 19.5, 13.7, and 27.5%. Although sample size is too small for a statistically-relevant comparison, I am lower across the board. VL projects a future average annual P/E of 17.0: greater than MS (16.6) and greater than mine (13.5).

MS high / low EPS are $10.00 / $7.94 versus my $7.17 / $7.17 (per share). My high EPS is less due largely to zero growth rate. VL’s $11.60 high EPS exceeds both.

MS LSPF of $94.70 (INVALID on today’s date) implies Forecast Low P/E of 11.9: less than the above-stated 13.7. MS LSPF is 12.9% less than the default $7.94/share * 13.7 = $108.78 resulting in more conservative zoning. MS LSPF is 46.8% greater than mine, however.

MOS is robust in this study because my inputs are near or below historical/analyst averages/ranges. I have discounted growth to zero! Tiny sample size aside, MS TAR (14.8%) exceeding mine by 6.7% per year and my lower LSPF also support MOS.

With regard to valuation, PEG is 0.54 per M*: significantly undervalued. Relative Value [(current P/E) / 5-year-mean average P/E] is quite low at 0.58. “Quick and dirty DCF” has stock undervalued by 35%. CFRA is the dissenter with a 12-month stock price target of $80.

Part of me feels like I’ve been duped into finding Fool’s Gold for the second straight study. Visual inspection looks encouraging only to find a company with little consistent growth projections (low-single-digits among a paucity of estimates and what projections are available offset one another with VL extremely bullish versus CFRA bearish, YF and Zacks trading one positive YOY forecast for another negative one, etc.). Financial strength also seems weak with high debt and low liquidity ratios.

The company is hardly a “quality growth stock” but Value is attractive, right? Academics say so. I still wonder but it’s not typically how we at BI prefer to find stocks. And sometimes Value progresses to being a trap.

Per U/D, SAIC is a BUY under $80.60/share. BI TAR criterion would be met [129.1 / ((13.97 / 100 ) +1 ) ^ 5] ~ $67 given a forecast high price ~$129.

A 90-day free trial to BetterInvesting® may be secured here (also see link under “Pages” section at top right of this page).

Categories: BetterInvesting® | Comments (0) | Permalink