Science Applications International Corp (SAIC, Financial) has seen a notable daily gain of 13.41%, complemented by a 3-month gain of 14.54%. With an Earnings Per Share (EPS) of 9.14, investors are keen to understand if the stock is modestly overvalued as suggested by its current market price. This article delves into the valuation analysis of Science Applications International, providing readers with a comprehensive assessment of the company's intrinsic value.
Company Introduction
Science Applications International Corp (SAIC, Financial) is a prominent provider of technical, engineering, and enterprise IT services, mainly to the U.S. government. The company specializes in large government projects, offering a wide range of services with a focus on advanced technology services. With a current stock price of $136 and a GF Value estimated at $105.43, there is an intriguing discrepancy to explore. This analysis aims to offer insights into whether Science Applications International is indeed modestly overvalued and what that implies for potential investors.
Summarize GF Value
The GF Value is a proprietary measure that reflects the intrinsic worth of a stock, factoring in historical trading multiples, a GuruFocus adjustment for past performance and growth, and projected future business outcomes. When a stock's price significantly exceeds the GF Value Line, it may be considered overvalued, potentially leading to subpar future returns. Conversely, a price well below the GF Value Line could signal undervaluation and the prospect of better returns. Currently, Science Applications International's stock price suggests a modest overvaluation.
Given its relative overvaluation, Science Applications International's stock might yield returns that lag behind the company's business growth rate. This potential misalignment warrants a closer examination of the company's financial health and growth prospects.
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Financial Strength
Investors must scrutinize a company's financial strength to avoid potential capital loss. Science Applications International's cash-to-debt ratio stands at 0.15, which is lower than the majority of its peers in the Software industry. This positions the company's financial strength at a fair level, with a GuruFocus ranking of 5 out of 10.
Profitability and Growth
Consistent profitability is a key indicator of a lower-risk investment. Science Applications International has maintained profitability for the past decade, with an operating margin of 10.07%, outperforming 72.15% of its industry counterparts. Its profitability rank is a robust 8 out of 10. In terms of growth, the company's annual revenue growth rate of 8.5% is commendable, surpassing half of the companies in the Software industry. Additionally, its 3-year average EBITDA growth rate of 10.8% further underscores its competitive growth stature.
ROIC vs. WACC
Assessing a company's profitability also involves comparing its Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC). A higher ROIC than WACC is preferable. Science Applications International's ROIC is an impressive 13.52, while its WACC is 7.06, indicating efficient capital utilization.
Conclusion
In summary, Science Applications International Corp (SAIC, Financial) appears to be modestly overvalued. However, the company's financial condition is fair, and its profitability is strong. The growth outpaces over half of its competitors in the Software industry. For a more detailed exploration of Science Applications International's financials, investors can review the company's 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
