SAIC has been on fire lately. In the past six months alone, the company’s stock price has rocketed 46.5%, reaching $124.83 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is there a buying opportunity in SAIC, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is SAIC Not Exciting?
We’re happy investors have made money, but we don’t have much confidence in SAIC. Here are two reasons why SAIC doesn’t excite us, plus one stock we’d rather own.
1. Long-Term Revenue Growth Flatter Than a Pancake
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, SAIC struggled to consistently increase demand as its $7.29 billion of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a sign of lacking business quality.
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect SAIC’s revenue to drop by 1.6%, a decrease from its flat result for the past five years. This projection doesn’t excite us and suggests its products and services will see some demand headwinds.
Final Judgment
SAIC isn’t a terrible business, but it doesn’t pass our bar. Following the recent surge, the stock trades at 13.1× forward P/E (or $124.83 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We’re pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at one of our all-time favorite software stocks.
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