BAH Stock Study (11-24-25)

Posted by Mark on April 24, 2025 at 06:48 | Last modified: November 24, 2025 07:26

I recently did a stock study on Booz Allen Hamilton Holding Corp. (BAH, $80.78).

M* writes:

     > Booz Allen Hamilton Holding Corp provides technology
     > solutions in areas such as artificial intelligence,
     > cybersecurity, and related fields. The company serves
     > U.S. federal government agencies, commercial clients,
     > and select international customers. It also provides
     > technologies to evolve defense missions and delivers
     > solutions to warfighters in the digital battlespace.

Over the past decade, this large-size company has grown sales and earnings at annualized rates of 9.0% and 12.6%, respectively [references to year from Value Line (VL) and BI website incremented by 1 to align with FY ending Mar 31]. Lines are up, straight, and parallel except for YOY EPS declines in ’22 and ’23. Ten- (Five-) year EPS R^2 is 0.20 (0.59), but Value Line (VL) gives an impressive Earnings Predictability score of 100.

Over the past decade, PTPM trails industry averages [no peers available] while edging higher from 7.0% (’16) to 10.2% (’25) with a last-5-year mean of 7.6%. ROE leads industry averages while ranging from 22.2% in ’23 to 75.4% (’16) with a last-5-year mean of 50.0%. Debt-to-Capital is much higher than industry averages while ranging from 71.4% in ’21 to 80.8% in ’25 with a last-5-year mean of 76.0%.

Quick Ratio is 1.7 and Interest Coverage is 5.8 per M* who assigns a “Narrow” [quantitative] Economic Moat and gives a C grade for Financial Health (per BI website). VL gives a B+ grade for Financial Strength.

With regard to sales growth:

• YF projects YOY 5.1% contraction and 2.9% growth for ’26 and ’27, respectively (based on 11 analysts).
• Zacks projects YOY 5.0% contraction and 2.7% growth for ’26 and ’27, respectively (6 analysts).
• VL projects 3.9% annualized growth from ’25-’30.
• CFRA projects contraction of 4.9% YOY and 0.9% per year for ’26 and ’25-’27.
• M* provides a 2-year ACE of 2.3% contraction per year.

My flat forecast is about middle of the range.

With regard to EPS growth:

• MarketWatch projects 2.3% contraction and 2.2% growth per year for ’25-’27 and ’25-’28 (based on 13 analysts).
• Nasdaq.com gives ACE 5.6% YOY and 9.3% per year for ’26 and ’25-’27 (9 / 7 / 4 analysts for ’26 / ’27 / ’28).
• Seeking Alpha projects 4-year annualized growth of 1.6%.
• Finviz gives ACE 5-year annualized growth of 2.2% (5).
• LSEG estimates LTG at 1.6%.
• YF gives ACE YOY 12.4% contraction and 9.0% growth for ’26 and ’27, respectively (11).
• Zacks gives ACE YOY 10.7% contraction and 5.6% growth for ’26 and ’27 (5) along with 5-year growth of 10.0%/year.
• VL projects 5.1% annualized growth from ’25-’30.
• CFRA projects contraction of 13.1% YOY and 3.9% per year for ’26 and ’25-’27 along with 3-yr CAGR of 2.0%.

My 1.0% forecast is below the long-term-estimate range (mean of five: 4.1%). Initial value is 2026 Q2 EPS of $6.55/share (TTM and still up 43% versus 2025) rather than ’24 EPS of $4.59.

My Forecast High P/E is 20.0. Over the past 10 years, high P/E increases from 16.2 (’16) to 26.3 (’25) with a last-5-year mean (excluding 55.4 outlier in ’23) of 27.1 and a last-5-year-mean average P/E of 22.2 (also excluding ’23 low P/E). I am near bottom of the range (only ’16 is less).

My Forecast Low P/E is 9.0. Over the past 10 years, low P/E increases from 12.3 (’16) to 13.9 (’25) with a last-5-year mean (excluding 37.7 outlier in ’23) of 17.3. I am forecasting near bottom of the range (only ’16 is less).

My Low Stock Price Forecast (LSPF) of $58.90 is default given initial value from above. This is 27.1% less than the previous closing price and 25.6% less than the 52-week low.

Over the past 10 years, Payout Ratio (PR) ranges from 28.7% in ’25 to 44.8% in ’22 (excluding 86.7% outlier in ’23) with a last-5-year mean of 36.3%. I am forecasting below the range at 27.0%.

These inputs land BAH in the HOLD zone with a U/D ratio of 2.6. Total Annualized Return (TAR) is 12.6%.

PAR (using Forecast Average—not High—P/E) of 6.2% is less than I seek for a large-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 65 studies done in the past 90 days (31 outliers including mine excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 6.0%, 6.5%, 22.2, 14.9, and 45.9%, respectively. I am lower across the board. VL projects a future average annual P/E of 18.0 that is greater than MS (16.6) and greater than mine (14.5).

MS high / low EPS are $10.05 / $7.85 versus my $6.88 / $6.55 (per share). My high EPS is less due to a lower initial value and minuscule growth rate. VL is in the middle at $8.15.

MS LSPF of $81.00 (INVALID on today’s date) implies a Forecast Low P/E of 10.3: much less than the above-stated 14.9. MS LSPF is 30.8% less than the default $7.85/share * 14.9 = $116.97 (also INVALID) resulting in more conservative zoning. MS LSPF is still 37.5% greater than mine.

MOS is robust in the current study because my inputs are less than or near respective analyst/historical ranges and MS averages. MS TAR being 8.3%/year greater than mine along with a much greater MS LSPF also support the MOS.

With regard to valuation, PEG is 1.4 and 1.0 per Zacks and M*: fairly valued. Relative Value [(current P/E) / 5-year-mean average P/E] is quite low at 0.55 and the “quick and dirty DCF” indicates 14% undervalued.

I think this company could become higher quality by paying down debt and improving liquidity ratios. I would also like to see more consistent estimates of growth (including long-term) rather than contraction. Despite not being a “quality growth stock” right now, though, value could be in play.

Per U/D, BAH is a BUY under $78.70/share. BI TAR criterion is met [137.6 / ((13.47 / 100 ) +1 ) ^ 5] ~ $73.00 with a forecast high price ~$138.

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