Science Applications International Corporation
SAIC
$128.22
+1.79%
Science Applications International Corporation (SAIC) is a leading provider of technical, engineering, and enterprise IT services, primarily serving the U.S. government across defense, intelligence, and civilian agencies. The company operates through two segments—Defense and Intelligence, which generates the majority of revenue, and Civilian—offering end-to-end solutions from design to sustainment of critical IT infrastructure. SAIC is a key player in the government services market, competing with peers like Leidos and Booz Allen Hamilton, and is recognized for its deep domain expertise in national security and digital transformation. The current investor narrative centers on the company's ability to navigate a challenging federal budget environment, with recent revenue declines and margin pressures, while also capitalizing on modernization and AI-driven opportunities within its contract portfolio.…
SAIC
Science Applications International Corporation
$128.22
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Investment Opinion: Should I buy SAIC Today?
Based on the analysis, I rate SAIC as a Hold. The stock is trading at a 40% discount to its industry average PE, but the consensus analyst target of $121.50 implies a 3.5% downside, and the Hold rating reflects limited near-term upside. The thesis is that SAIC's undervaluation and strong cash flow provide a margin of safety, but revenue growth is needed to unlock value.
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SAIC 12-Month Price Forecast
The AI assessment is neutral, reflecting a balanced risk-reward profile. The stock's low valuation and strong cash flow provide downside support, but revenue declines and high leverage cap upside. A bullish stance would be justified if revenue growth turns positive and the company deleverages; a bearish stance would be triggered by further revenue deterioration or margin compression.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Science Applications International Corporation's 12-month outlook, with a consensus price target around $121.50 and implied upside of -5.2% versus the current price.
Average Target
$121.50
0 analysts
Implied Upside
-5.2%
vs. current price
Analyst Count
—
covering this stock
Price Range
$93 - $137
Analyst target range
SAIC is covered by 10 analysts, with a consensus recommendation of 'Hold' and a mean rating of 2.82 (where 1 is Strong Buy and 5 is Sell). The average target price is $121.50, implying a downside of -3.5% from the current price of $125.96. The distribution includes 2 Buy ratings, 6 Hold/Neutral, and 2 Sell ratings, reflecting a cautious stance. The low target of $93.00 suggests a potential 26% downside, while the high target of $137.00 offers 8.8% upside, indicating a wide range of expectations.
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Bulls vs Bears: SAIC Investment Factors
SAIC presents a mixed picture: it is fundamentally undervalued relative to peers, with strong profitability and cash flow, but faces revenue declines and a cautious analyst outlook. The bull case rests on the valuation discount and momentum, while the bear case centers on revenue headwinds and high leverage. Currently, the evidence slightly favors the bull case given the attractive valuation and robust financial health, but the key tension is whether revenue growth can stabilize. If SAIC can return to positive revenue growth, the stock could re-rate higher; if not, the low growth may justify the discount.
Bullish
- Undervalued vs. Industry: SAIC trades at a trailing PE of 13.16x and forward PE of 11.45x, a 40% discount to the industry average of 22x. This suggests the market is pricing in lower growth or higher risk, but the discount may be unwarranted given the company's stable government contracts and positive free cash flow.
- Strong 6-Month Momentum: The stock has surged 36.53% over the past 6 months, significantly outperforming the S&P 500's 12.15% gain. This momentum reflects improving investor sentiment and a successful breakout from consolidation, indicating potential for continued upside.
- Solid Free Cash Flow: SAIC generated $609 million in trailing twelve-month free cash flow, providing ample capacity for debt reduction, dividends, and share buybacks. This financial flexibility supports shareholder returns and reduces balance sheet risk.
- High ROE and Profitability: With a return on equity of 23.87% and a net margin of 4.93%, SAIC demonstrates efficient capital use and profitability. The ROE is particularly strong, indicating management's ability to generate returns for shareholders.
Bearish
- Revenue Decline in Latest Quarter: Q4 FY2026 revenue fell 4.79% year-over-year to $1.75 billion, following a pattern of fluctuating quarterly revenues. This decline suggests demand headwinds in the government services market, potentially due to budget constraints.
- Analyst Consensus is Hold: With a mean rating of 2.82 (where 1 is Strong Buy and 5 is Sell) and an average target price of $121.50, analysts see limited upside—actually implying a 3.5% downside from the current price of $125.96. The consensus reflects caution about near-term growth.
- High Debt-to-Equity Ratio: SAIC's debt-to-equity ratio stands at 1.804, indicating significant leverage. This increases financial risk, especially if interest rates remain elevated or cash flows weaken, potentially constraining future investments or dividend growth.
- Underperformance vs. Market: Over the past year, SAIC gained only 6.89% compared to the S&P 500's 18.56% return. This underperformance highlights the stock's lower beta (0.286) and defensive nature, which may not appeal to growth-oriented investors.
SAIC Technical Analysis
SAIC's stock has demonstrated a robust recovery over the past year, with a 1-year price change of +6.89%, though it has significantly underperformed the S&P 500's +18.56% gain. The current price of $125.96 sits at 96.3% of its 52-week range (low of $81.08, high of $130.84), indicating the stock is trading near its highs, which typically reflects strong momentum but also potential overextension. The 6-month change of +36.53% underscores a powerful uptrend, with the stock breaking out from a consolidation phase in early 2026.
Beta
0.29
0.29x market volatility
Max Drawdown
-31.8%
Largest decline past year
52-Week Range
$81-$143
Price range past year
Annual Return
+8.9%
Cumulative gain past year
| Period | SAIC Return | S&P 500 |
|---|---|---|
| 1m | +9.5% | +2.7% |
| 3m | +13.1% | +1.0% |
| 6m | +37.4% | +12.0% |
| 1y | +8.9% | +18.9% |
| ytd | +26.7% | +12.5% |
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SAIC Fundamental Analysis
SAIC's revenue trajectory has been mixed, with the most recent quarter (Q4 FY2026, ending January 30, 2026) showing revenue of $1.75 billion, a decline of 4.79% year-over-year. This follows a pattern of fluctuating quarterly revenues: Q3 FY2026 saw $1.866 billion, Q2 FY2026 $1.769 billion, and Q1 FY2026 $1.877 billion, indicating a slight deceleration in the latest quarter. The Defense and Intelligence segment contributed $1.439 billion, while Civilian added $288 million, with the former driving the bulk of revenue but also facing budget headwinds. The revenue decline suggests a challenging demand environment, but the company's focus on high-priority national security programs may provide a floor.
Quarterly Revenue
$1.8B
2026-01
Revenue YoY Growth
-4.8%
YoY Comparison
Gross Margin
12.6%
Latest Quarter
Free Cash Flow
$609000000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is SAIC Overvalued?
Given SAIC's positive net income, the PE ratio is the primary valuation metric. The trailing PE stands at 13.16x, while the forward PE is 11.45x, indicating the market expects earnings growth. The gap between trailing and forward PE implies an anticipated EPS increase of approximately 15%, which aligns with analyst estimates of $12.48 for the current fiscal year. Compared to the industry average PE of 22x (based on available data), SAIC trades at a 40% discount, suggesting the stock is undervalued relative to peers, possibly due to its lower growth profile and government-contracting risks.
PE
13.2x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 7x~22x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
10.9x
Enterprise Value Multiple
Investment Risk Disclosure
Financially, SAIC carries a high debt-to-equity ratio of 1.804, which amplifies vulnerability to rising interest rates and economic downturns. The company's net margin of 4.93% is thin, leaving little room for cost shocks, and revenue concentration in the U.S. government (primarily defense) exposes it to budget cuts and contract renegotiations. The latest quarter's 4.79% revenue decline signals potential demand erosion, which could pressure earnings if not reversed. However, the strong free cash flow of $609 million provides a buffer to service debt and maintain dividends, mitigating immediate solvency risks.
FAQ
The key risks include: 1) Financial risk from high debt-to-equity of 1.804, which could strain cash flows if interest rates rise. 2) Revenue concentration in U.S. government contracts, making it vulnerable to budget cuts and political shifts. 3) Competitive risk from larger peers like Leidos and Booz Allen, which may win more contracts. 4) Macro risk from a potential recession, which could pressure government spending. The most severe risk is a significant budget cut, which could lead to a 26% downside to the low target of $93.
The 12-month forecast is mixed. The base case (50% probability) sees the stock trading around $121.50, roughly flat from current levels. The bull case (30% probability) targets $137-145, driven by revenue stabilization and re-rating. The bear case (20% probability) could see the stock fall to $93-100 if revenue declines accelerate. The most likely scenario is the base case, assuming revenue remains flat and the company continues to generate strong cash flow.
SAIC appears undervalued relative to its industry, trading at a trailing PE of 13.16x versus the industry average of 22x, a 40% discount. The forward PE of 11.45x suggests the market expects earnings growth, but the PEG ratio of 1.90 indicates the stock is not cheap on a growth-adjusted basis. The market is pricing in low growth and government-contracting risks, which may be overly pessimistic given the company's stable cash flows and high ROE. Overall, the valuation is attractive for a defensive stock, but the discount reflects real challenges.
SAIC is a reasonable buy for value investors given its 40% discount to the industry PE and a dividend yield of 1.49%. However, the consensus analyst target of $121.50 implies a 3.5% downside, and revenue is declining. The stock is a good buy if you believe revenue will stabilize and the valuation gap will close, but it is not a compelling growth story. For risk-averse investors seeking income and stability, it may be a suitable addition, but for growth-focused investors, better opportunities exist elsewhere.
SAIC is better suited for long-term investment due to its low beta of 0.286, stable government contracts, and dividend yield of 1.49%. The stock's 6-month momentum of +36.53% suggests short-term trading opportunities, but the high debt and revenue volatility make it less predictable. For long-term investors, the undervaluation and cash flow provide a margin of safety, but they should be prepared for periods of underperformance. A minimum holding period of 3-5 years is recommended to ride out budget cycles and benefit from potential re-rating.
