Leidos
LDOS
$127.69
-2.50%
Leidos Holdings, Inc. is a technology, engineering, and science company that provides services and solutions in defense, intelligence, civil, and health management to U.S. government agencies including the Department of Defense, the Intelligence Community, and the Department of Homeland Security, as well as international customers. The company operates through four reportable segments—National Security & Digital, Health & Civil, Commercial & International, and Defense Systems—positioning it as a diversified government services integrator rather than a pure-play defense prime. The current investor narrative is dominated by the company's pivot toward AI infrastructure and grid modernization, highlighted by the recent $2.4 billion ENTRUST acquisition, which management frames as a strategic move to capture surging power demand from AI data centers. However, this growth story is tempered by near-term headwinds: a government shutdown overhang, cautious guidance that overshadowed record profits in the most recent quarter, and a stock price that has fallen sharply over the past year, leaving investors to debate whether the AI pivot can offset federal budget uncertainty.…
LDOS
Leidos
$127.69
Related headlines
Investment Opinion: Should I buy LDOS Today?
The synthesized recommendation is Hold. The core thesis is that Leidos offers deep value on forward earnings (10.01x forward PE) and strong free cash flow (7.65% FCF yield), but near-term headwinds—margin compression, stagnant 3.65% revenue growth, and government budget uncertainty—are likely to cap upside until the AI infrastructure pivot proves itself. The analyst consensus of Buy with an average target of $156.60 implies 22.6% upside, but the wide target range ($125–$225) and recent downgrades suggest caution is warranted.
Supporting evidence for the Hold rating includes: (1) the forward PE of 10.01x versus trailing PE of 16.35x, implying the market expects 63% EPS growth that may be optimistic given decelerating revenue; (2) TTM free cash flow of $1.859 billion and a 7.65% FCF yield, which provide financial flexibility; (3) a PEG ratio of 0.82, suggesting the stock is undervalued relative to its growth rate; and (4) the PS ratio of 1.41x near multi-year lows, reflecting pessimistic sentiment. However, net margin compression to 7.45% from 8.55% and operating margin decline to 11.55% from 12.49% offset these positives. The debt-to-equity ratio of 1.21 and the $2.4 billion ENTRUST acquisition add integration and leverage risk.
The biggest risks that could invalidate the thesis are: (1) failure to realize ENTRUST synergies or AI-driven revenue acceleration, which would make the forward PE of 10.01x a value trap; (2) further government budget cuts or a prolonged shutdown reducing revenue visibility; and (3) continued margin erosion below 7% net margin. The rating would upgrade to Buy if revenue growth accelerates above 5% and net margin stabilizes above 8%, or if the stock drops below $110 with unchanged fundamentals. It would downgrade to Sell if revenue growth turns negative or if free cash flow falls below $1.5 billion. Relative to its history (trailing PE as low as 11.93x in Q1 2025) and peers, the stock appears undervalued on forward earnings but fairly valued on trailing metrics, justifying a Hold until clearer growth signals emerge.
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LDOS 12-Month Price Forecast
The forward-looking view is neutral with medium confidence. The valuation is undeniably cheap on forward earnings (10.01x PE, 0.82 PEG), but the market is pricing in a significant earnings recovery that requires successful ENTRUST integration and AI-driven growth. Revenue growth of 3.65% and margin compression to 7.45% net margin suggest the company is not yet demonstrating the acceleration needed to justify the forward estimates. The low beta of 0.572 and 7.65% FCF yield offer defensive characteristics, but the 31.77% one-year decline and 49.89% max drawdown highlight the risk of further downside if execution disappoints. I would upgrade to bullish if revenue growth accelerates above 5% and net margin stabilizes above 8%, or if the stock drops below $110 with unchanged fundamentals. I would downgrade to bearish if revenue growth turns negative or if free cash flow falls below $1.5 billion.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Leidos's 12-month outlook, with a consensus price target around $157.27 and implied upside of +23.2% versus the current price.
Average Target
$157.27
0 analysts
Implied Upside
+23.2%
vs. current price
Analyst Count
—
covering this stock
Price Range
$132 - $225
Analyst target range
Leidos is covered by 15 analysts, with a consensus recommendation of "Buy" (mean rating of 2.35 on a scale where 1 is Strong Buy and 5 is Strong Sell). The average target price is $156.60, which implies a 22.6% upside from the current price of $127.69. The consensus leans bullish, but the distribution of ratings shows a mix: recent actions include Neutral from Goldman Sachs, Overweight from JP Morgan, Buy from Truist and Citigroup, and Hold from TD Cowen and Jefferies. Notably, B of A Securities downgraded from Buy to Neutral in June 2026, and Jefferies downgraded from Buy to Hold in June 2026, indicating some caution among analysts. Despite these downgrades, the average target still suggests significant upside, reflecting confidence in the company's long-term prospects.
The target price range is wide, from a low of $125 to a high of $225, a spread of $100 or 80% of the low target. This wide range signals high uncertainty about the company's future performance. The high target of $225 likely assumes successful integration of the ENTRUST acquisition, accelerating AI-driven demand, and multiple expansion, while the low target of $125 implies stagnant growth, margin compression, and perhaps a recession or further government budget cuts. The fact that the low target is below the current price suggests that some analysts see downside risk. The recent downgrades and the wide spread indicate that conviction is not strong, and the stock could be volatile as new information emerges. Overall, the analyst community is cautiously optimistic but divided, with the consensus target offering meaningful upside if the company can execute on its AI and infrastructure strategy.
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Bulls vs Bears: LDOS Investment Factors
The bear case currently has stronger evidence, driven by the severe downtrend (-31.77% 1-year return), margin compression, and stagnant 3.65% revenue growth. However, the bull case rests on a compelling valuation disconnect: a forward PE of 10.01x and PEG of 0.82 suggest the market is pricing in a pessimistic scenario that may not materialize. The single most important tension is whether the AI infrastructure pivot via the $2.4 billion ENTRUST acquisition can reignite growth and offset federal budget headwinds. If ENTRUST delivers synergies and AI-driven demand accelerates, the stock could re-rate sharply; if integration stumbles or government spending tightens further, the downtrend may persist.
Bullish
- Deep Value on Forward Earnings: The forward PE of 10.01x is less than half the trailing PE of 16.35x, implying the market expects roughly 63% EPS growth over the next year. With a PEG ratio of 0.82 and a PS ratio of 1.41x near multi-year lows, the stock is priced for pessimism that may prove overdone.
- Strong Free Cash Flow Generation: TTM free cash flow of $1.859 billion yields approximately 7.65% on the $24.29 billion market cap, providing ample capacity to fund the $2.4 billion ENTRUST acquisition, service debt, and maintain the dividend. This cash generation supports the balance sheet even as leverage rises.
- AI Infrastructure Pivot via ENTRUST: The $2.4 billion ENTRUST grid-infrastructure acquisition positions Leidos to capture surging power demand from AI data centers, a secular growth theme. Management frames this as a strategic move to diversify beyond traditional government services into higher-growth commercial markets.
- Analyst Consensus Sees 22.6% Upside: The average analyst target of $156.60 implies 22.6% upside from the current $127.69, with a consensus recommendation of Buy (mean rating 2.35). The high target of $225 suggests substantial optionality if the AI narrative gains traction.
Bearish
- Severe Multi-Year Downtrend: The stock is down 31.77% over the past year and 30.40% YTD, with a max drawdown of -49.89%. It trades 37.9% below its 52-week high of $205.77 and only 26.4% above its 52-week low of $98.86, signaling persistent selling pressure.
- Margin Compression Despite Revenue Growth: Q1 2026 net margin fell to 7.45% from 8.55% a year earlier, while gross margin declined to 17.30% from 17.83% and operating margin contracted to 11.55% from 12.49%. This compression suggests pricing pressure or unfavorable mix that could weigh on earnings.
- Stagnant Revenue Growth: Q1 2026 revenue grew only 3.65% YoY to $4.40 billion, decelerating from 5.2% in Q3 2025. Revenue has hovered in the $4.2–$4.5 billion range for multiple quarters, indicating stagnation rather than acceleration for a company trading at a premium on some metrics.
- Government Shutdown and Budget Overhang: Recent news highlights that a government shutdown and cautious guidance overshadowed record profits, sending shares down 6% in February 2026. As a major federal contractor, Leidos remains highly sensitive to budget uncertainty and political gridlock.
LDOS Technical Analysis
Leidos is in a pronounced downtrend, with the stock down 31.77% over the past year and currently trading at $127.69, which is only 26.4% above its 52-week low of $98.86 and 37.9% below its 52-week high of $205.77. This places the stock in the lower quartile of its 52-week range, signaling persistent selling pressure and a lack of sustained buying interest. The magnitude of the decline—a max drawdown of -49.89%—confirms that this is not a minor pullback but a deep correction, and the stock is trading well below any reasonable moving average, reinforcing the bearish trend.
Short-term momentum is mixed but leans negative: the stock is down 12.73% over the past month, significantly underperforming the S&P 500's -0.96% decline, resulting in a relative strength of -11.77% for the month. However, over the past three months, LDOS has gained 19.20%, outpacing the S&P 500's 2.00% gain, with a relative strength of +17.20%. This divergence—strong 3-month performance against a weak 1-month trend—suggests the stock may have staged a sharp rally off its lows (from $98.86 to a high of $146.31 in August) but has since given back a significant portion of those gains. The 6-month change of -23.02% and YTD decline of -30.40% indicate that the longer-term downtrend remains firmly intact, and the recent 1-month weakness could be the start of a retest of the lows rather than a temporary pullback.
Key technical levels are clear: immediate support sits at the 52-week low of $98.86, while resistance is established at the 52-week high of $205.77, with intermediate resistance likely around the $146–$150 area where the stock recently failed. A breakdown below $98.86 would signal a continuation of the bearish trend and potentially trigger further selling, while a breakout above $146 would be needed to suggest a trend reversal. The stock's beta of 0.572 indicates it is significantly less volatile than the broader market—roughly 43% less volatile than SPY—which means that while the stock has fallen sharply, its day-to-day price swings are relatively muted, making it less risky for position sizing but also less likely to experience explosive upside moves without a fundamental catalyst.
Beta
0.57
0.57x market volatility
Max Drawdown
-49.9%
Largest decline past year
52-Week Range
$99-$206
Price range past year
Annual Return
-31.8%
Cumulative gain past year
| Period | LDOS Return | S&P 500 |
|---|---|---|
| 1m | -12.7% | -0.5% |
| 3m | +19.2% | +2.3% |
| 6m | -23.0% | +16.6% |
| 1y | -31.8% | +14.8% |
| ytd | -30.4% | +11.7% |
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LDOS Fundamental Analysis
Leidos's revenue trajectory is modestly growing but decelerating: the most recent quarter (Q1 2026, ended April 3, 2026) reported revenue of $4.40 billion, up 3.65% year-over-year from $4.245 billion in Q1 2025. Sequentially, revenue increased from $4.207 billion in Q4 2025, but the YoY growth rate of 3.65% is below the 5.2% YoY growth seen in Q3 2025 (revenue of $4.469 billion vs. $4.19 billion in Q3 2024). The multi-quarter trend shows revenue hovering in the $4.2–$4.5 billion range, indicating stagnation rather than acceleration. The Health Segment contributed $1.188 billion in the most recent period, but without segment-level growth rates, it is difficult to pinpoint which business lines are driving or dragging overall growth; however, the modest overall growth suggests that the company is not experiencing a broad-based acceleration, which is a concern for a stock trading at a premium valuation.
Profitability remains solid but margins are compressing. In Q1 2026, net income was $328 million, down from $363 million in Q1 2025, despite higher revenue, and the net margin declined to 7.45% from 8.55% a year earlier. Gross margin also fell to 17.30% in Q1 2026 from 17.83% in Q1 2025, and operating margin contracted to 11.55% from 12.49%. The trailing twelve-month (TTM) net margin is 8.48%, which is respectable for the IT services industry, but the downward trend in margins over recent quarters is a red flag. The company remains profitable, but the compression suggests pricing pressure, higher costs, or a less favorable mix, which could weigh on future earnings growth if not reversed.
Balance sheet and cash flow metrics reveal a leveraged but cash-generative business. The debt-to-equity ratio stands at 1.21, and the current ratio is 1.70, indicating adequate liquidity but a significant debt load. Free cash flow (FCF) for the TTM is $1.859 billion, which provides substantial internal funding capacity, and the FCF yield is approximately 7.65% based on the current market cap of $24.29 billion. However, the company's ROE of 29.62% is strong, reflecting efficient use of equity, but it is partly inflated by leverage. The Q1 2026 cash flow statement shows operating cash flow of $301 million and free cash flow of $270 million, down from $580 million and $36 million in Q1 2025, respectively, but the prior-year quarter was distorted by working capital swings. The company also spent $2.338 billion on acquisitions in Q1 2026, funded partly by debt repayment of $1.692 billion, indicating a strategic shift toward M&A that could pressure the balance sheet if not managed carefully.
Quarterly Revenue
$4.4B
2026-04
Revenue YoY Growth
+3.6%
YoY Comparison
Gross Margin
17.3%
Latest Quarter
Free Cash Flow
$1.9B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is LDOS Overvalued?
Since Leidos is profitable with positive net income of $328 million in the most recent quarter and TTM net income, the PE ratio is the primary valuation metric. The trailing PE is 16.35x, while the forward PE is 10.01x, implying that the market expects significant earnings growth—approximately 63%—over the next year. This large gap between trailing and forward PE suggests that analysts are forecasting a substantial rebound in earnings, likely driven by the AI infrastructure pivot and cost synergies from the ENTRUST acquisition. However, if those expectations are not met, the stock could be vulnerable to a sharp re-rating.
Compared to the IT services industry, Leidos trades at a discount on some metrics but a premium on others. The PS ratio is 1.41x, which is relatively low, but the PB ratio of 4.94x is elevated. The EV/EBITDA of 12.06x is moderate for the sector, but without a direct industry average provided, we can infer from the data that the stock is not uniformly cheap or expensive. The PEG ratio of 0.82 suggests the stock is undervalued relative to its growth rate, but the forward PE of 10.01x is well below the trailing PE, indicating that the market is pricing in a strong earnings recovery. If the company can deliver on that growth, the current valuation could be attractive; if not, the stock may be a value trap.
Historically, Leidos's valuation has ranged widely. The current trailing PE of 16.35x is near the lower end of its historical range over the past few years—for example, it was as high as 21.49x in Q1 2022 and as low as 11.93x in Q1 2025. The PS ratio of 1.41x is also near multi-year lows, compared to levels above 5x in 2025. This suggests that the market is pricing in pessimistic expectations, possibly due to government budget concerns and margin compression. However, the forward PE of 10.01x is significantly below the trailing PE, which could indicate that the market is either overly bearish or that earnings are expected to inflect positively. Given the recent acquisition and AI narrative, the current valuation may represent a value opportunity if the growth story materializes, but the low PS ratio also reflects the market's skepticism about revenue growth.
PE
16.4x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 12x~21x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
12.1x
Enterprise Value Multiple
Investment Risk Disclosure
Leidos carries a significant debt load with a debt-to-equity ratio of 1.21, and the recent $2.4 billion ENTRUST acquisition, partially funded by $1.692 billion in debt repayment, could pressure the balance sheet if cash flows disappoint. Free cash flow of $1.859 billion TTM provides a cushion, but Q1 2026 operating cash flow fell to $301 million from $580 million a year earlier, highlighting potential volatility. Margin compression is a clear risk: net margin declined to 7.45% from 8.55%, gross margin fell to 17.30% from 17.83%, and operating margin contracted to 11.55% from 12.49%, all on a YoY basis. Revenue concentration in U.S. government agencies, including the DoD and Intelligence Community, exposes the company to federal budget cycles and shutdown risks, as evidenced by the February 2026 revenue miss and cautious guidance that sent shares down 6%.
Market and competitive risks are elevated given the stock's 31.77% one-year decline and 49.89% max drawdown, which reflect a broader de-rating of government services peers. The forward PE of 10.01x implies the market expects 63% earnings growth; any shortfall could trigger a sharp re-rating, especially with the low analyst target of $125 below the current price. Competition from private defense contractors like Saronic, which is developing robotic warships, could disrupt traditional defense contracting dynamics and pressure Leidos's Defense Systems segment. The beta of 0.572 indicates lower market correlation, but sector rotation away from government services and toward pure-play AI or defense technology could keep the stock out of favor. Regulatory and political risks, including government shutdowns and budget sequestration, remain persistent overhangs.
In a worst-case scenario, a prolonged government shutdown combined with disappointing ENTRUST integration and continued margin erosion could drive the stock toward its 52-week low of $98.86, representing a 22.6% decline from the current $127.69. If analyst bear-case targets of $125 are breached and sentiment deteriorates further, the stock could retest the $98.86 low, implying a loss of approximately 22.6% from current levels. A more severe outcome, such as a recession triggering federal budget cuts and multiple compression, could push the stock below $98.86 toward the lower end of its historical trading range, potentially a 30%+ drawdown. The max drawdown of -49.89% over the past year demonstrates the stock's capacity for deep losses in adverse conditions.
FAQ
The most severe risk is government budget uncertainty, as a prolonged shutdown or sequestration could cut revenue, given the company's heavy reliance on U.S. government agencies. Second, margin compression is a clear threat: net margin declined to 7.45% from 8.55% YoY, and operating margin fell to 11.55% from 12.49%, which could worsen if pricing pressure persists. Third, integration risk from the $2.4 billion ENTRUST acquisition could strain the balance sheet, with debt-to-equity already at 1.21. Fourth, competitive disruption from private defense contractors like Saronic could pressure the Defense Systems segment. These risks are ranked in order of severity, with government budget uncertainty being the most immediate.
The 12-month forecast includes three scenarios: a bull case (25% probability) targeting $180–$225, driven by successful ENTRUST integration and AI-driven demand; a base case (55% probability) targeting $140–$170, assuming modest 3–4% revenue growth and stable margins; and a bear case (20% probability) targeting $98–$125, assuming a prolonged government shutdown and margin erosion. The base case is most likely, with the average analyst target of $156.60 serving as a reasonable anchor. The key assumption behind the base case is that revenue growth remains in the 3–4% range and net margin stabilizes around 7.5%.
LDOS appears undervalued on forward earnings but fairly valued on trailing metrics. The forward PE of 10.01x is significantly below the trailing PE of 16.35x, implying the market expects 63% EPS growth, while the PEG ratio of 0.82 suggests undervaluation relative to growth. The PS ratio of 1.41x is near multi-year lows, compared to levels above 5x in 2025, indicating the market is pricing in pessimistic expectations. However, the PB ratio of 4.94x is elevated, and the EV/EBITDA of 12.06x is moderate for the IT services sector. The market appears to be pricing in a successful AI pivot and ENTRUST integration; if those expectations are not met, the stock could re-rate lower.
From a risk/reward perspective, LDOS presents a mixed picture. The average analyst target of $156.60 implies 22.6% upside, and the forward PE of 10.01x is undemanding, but the stock is down 31.77% over the past year and faces margin compression (net margin fell to 7.45% from 8.55%). The biggest downside risk is a retest of the 52-week low of $98.86, representing a 22.6% decline from current levels. For value-oriented investors with a 12–18 month horizon, the risk/reward is favorable if ENTRUST synergies materialize. However, for short-term traders, the persistent downtrend and weak 1-month relative strength of -11.77% suggest waiting for a confirmed reversal above $146 before buying.
LDOS is better suited for long-term investment than short-term trading. The low beta of 0.572 indicates muted daily volatility, making it less attractive for short-term momentum plays, while the 0.87% dividend yield and strong free cash flow of $1.859 billion support a buy-and-hold income strategy. The stock's 31.77% one-year decline and 49.89% max drawdown highlight the risks of short-term holding during downtrends. Earnings visibility is moderate, with analyst estimates for $15 EPS providing some clarity, but government budget cycles introduce uncertainty. A suggested minimum holding period is 12–18 months to allow ENTRUST synergies to materialize and for potential multiple expansion.
