Financial Pros Take Interest in This Stock

Our TrackStar data provides a wealth of exclusive information and insights.

So, when searches by financial pros for a rarely discussed stock like Booz Allen Hamilton Holding Corp (BAH) catch proverbial fire, it’s hard not to notice.

While some folks have heard of the giant consulting company, many of you probably aren’t aware that since it debuted on the NYSE in late 2010, shares are up more than 1,500%!

So, what exactly do these financial pros know that we don’t?

Booz Allen Hamilton’s Business

Founded back in 1914, Booz Allen Hamilton has provided the U.S. government with consulting services for more than a century.

They helped the U.S. Navy prepare for WWII.

The company went public in late 2010 when it also acquired defense systems and engineering support.

With the Launched Vision Strategy in 2020, they’re moving away from consulting and more towards a solutions provider.

This has led them to focus on the following five key areas:

Source: BAH Investor Deck

97% of Booz Allen’s revenues come from the U.S. government with the rest spread across the commercial sector and international clients.

Source: BAH Investor Deck

Financials

Source: Stock Analysis

Given the massive run in share price, it’s rather odd to see revenue growth only break 10% once in the last several years.

While EPS has effectively doubled, as has free cash flow per share, it seems outlandish for the stock to rise +1,500%.

Even the share count reduction is less than 10% over the decade.

Valuation

Source: Seeking Alpha

We looked at the historical valuation for BAH and found that it used to trade at 10x-12x earnings, then upwards of 15x earnings, then 20x, and now as much as 30x earnings.

So, the price appreciation came largely from multiple expansion, which isn’t justified by growth or improved profitability.

That same phenomenon has not played out with other consulting companies.

Growth

Source: Seeking Alpha

Even the growth for BAH doesn’t stand up well to its competitors.

Yes, it’s one of the better ones in terms of revenue and earnings growth, but not by much.

Despite huge free-cash-flow gains, the company trades at nearly 21x operational cash flow, which is mediocre at best.

Profitability

Source: Seeking Alpha

Profitability-wise, BAH isn’t even close to the best in almost every category. The return on equity is decent, but the return on assets and total capital are nothing to write home about.

Our Opinion 2/10

We have enough evidence to conclude that BAH’s stock price isn’t justified by its financial performance.

Sure, it’s a good company with a stable customer base.

But there is no reason to pay nearly 3x more than a decade ago, especially with interest rates so high.