Leidos Holdings, Inc.LDOS · NYSE

Why the market may be pricing it low

• Nearly 87% of revenue comes from U.S. government contracts, making the company's fate hinge on a single customer's budget.

  generated 87% of revenues for the fiscal year ended January 2, 2026, (“fiscal 2025”) from U.S. government contracts, either as a prime contractor or a subcontractor to othersBusiness

• Leidos itself warns that shifts in U.S. government budget priorities could sharply cut revenue and growth, a fragility the market already prices in.

  A decline in the U.S. government budget, changes in spending or budgetary priorities or delays in contract awards may significantly and adversely affect our future revenues and limit our growth prospects.Risk factors

• The government can terminate or unfavorably renegotiate contracts at any time, so today's profitability is seen as not guaranteed to persist.

  The U.S. government may terminate, cancel, modify, renew on less favorable terms or curtail our contracts at any time prior to their completionRisk factors

What could close the gap

• An 8-K on 2026-03-30 (Item 2.01) disclosing completion of an asset acquisition or disposition could be read as diversifying away from pure government dependence.

  2026-03-30 Item 2.01,7.01,9.018-K filings

• Successive 8-Ks with Item 1.01 (material agreements) in January and April 2026 could signal new major contract wins that ease concerns over government budget risk.

  2026-04-15 Item 1.01,7.01,9.018-K filings

• Meeting customer-driven cybersecurity certifications like CMMC is described as necessary to win future contracts, so visible progress here could shift views on competitiveness.

  increasingly subject to customer-driven cybersecurity certification requirements, including but not limited to CMMC, which are expected to be necessary to win future contractsMD&A

How a buyer could still lose (value trap)

• The Piotroski check shows the leverage ratio did not improve year over year, meaning debt has grown; if government budgets tighten, repayment burden could weigh more heavily.

  Based on the figures below

• The company admits it may not realize the full amount reflected in its backlog as revenue, so current profitability could rest partly on backlog that never converts.

  We may not realize the full amounts reflected in our backlog as revenues, which could adversely affect our expected future revenues and growth prospects.Risk factors

Financial quality (Piotroski F-score)

• ✓Profitable (ROA > 0)
• ✓Positive operating cash flow
• ✓ROA up on last year
• ✓Cash flow exceeds net profit
• ✗Leverage down on last year
• ✓Current ratio up on last year
• ✓No new shares issued
• –Gross margin up on last yearno data
• ✓Asset turnover up on last year

Scored out of the checks with data, scaled to 9. Compares the latest year with the year before.

Figures

Sales

$17.6bn

Operating profit

$2.0bn

Net profit

$1.4bn

Operating cash flow

$2.3bn

Cash

$748m

Debt

$1.2bn

Equity

$5.3bn

Latest twelve months to 2026-07-03; F-score for the fiscal year to 2026-01-02