Leidos Holdings Inc LDOS

Valuation holds this up; Management is the soft spot.

The price needs 0.0% growth a year for ten years. The AI thinks 6.0% is achievable, at a 13.0% margin.

Leidos trades at a low-teens multiple for a business that reliably converts ~12% of revenue into free cash flow with almost no capex. Its government moats and NorthStar strategy should deliver steady mid-single-digit growth for years, more than enough to justify the price. The main risk is slower-than-expected execution on the new growth pillars or defense budget pressure.

Leidos Holdings, Inc., together with its subsidiaries, provides services and solutions for government and commercial customers in the United States and internationally. The National Security & Digital segment provides national security software; services by using artificial intelligence and machine learning to coordinate sea, ground, air, and space to help warfighters; offensive, defensive, and physical cyber operation solutions; intelligence analysis, operational support, logistics operations, security, linguistics, force production, biometrics, chemical, biological, radiological, nuclear, and explosives, energetics, training, and other services; and Digital Modernization and transformation services. The Health & Civil segment offers air traffic control systems; health mission software; managed health services; infrastructure management and operation; logistical operations and information technology support; and life science research and development support services. The Commercial & International segment provides power grid engineering and design, grid modernization, utility planning and consulting, energy management and efficiency, technology-driven innovation, and software and application development; people scanners, computed tomography carry-on baggage scanners, checked baggage scanners, and explosive trace detectors; mobile, non-intrusive ports and borders inspection systems; and open-architecture platform that transforms airport security by integrating disparate devices and technologies into a unified management system. The Defense Systems segment offers air and missile defense, maritime, aerospace, and cyber and threat systems; offers airborne training, intelligence, surveillance, and reconnaissance missions; and provides space-based electro-optic infrared systems, multi/hyperspectral, electronic warfare and signals intelligence, and communications payloads. Leidos Holdings, Inc. was founded in 1969 and is headquartered in Reston, Virginia.

Write why this business works, set your own fair value, and let the briefing speak only when a rule you wrote is crossed.