Leidos Holdings, Inc. (NYSE:LDOS)

CAPS Rating: 3 out of 5

The Company provides scientific, engineering, systems integration & technical services & solutions to all branches of the U.S. military, agencies of the U.S. Department of Defense, the intelligence community & the U.S. Department of Homeland Security etc.

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All Players

711 Outperform
51 Underperform
 

All-Star Players

133 Outperform
9 Underperform
 

Wall Street

7 Outperform
2 Underperform
 

Top LDOS Bull/Bear Pitches

The best Bull and Bear pitches based on recency and number of recommendations.

TMFDeej (97.83)
Submitted November 01, 2016

I was catching up on last month's Value Investor Insight this morning and I came across an interesting value investing idea in an interview with Sunjay Mishra of Tourbillon Capital Partners.The firm likes the stock of Leidos (LDOS). There's a number… More

LucklessWonder (48.91)
Submitted March 28, 2008

Short-term, it's overpriced with regard to PEG and Price per Free Cash Flow. Downstream, if Obama wins the presidency, I have to think that defense contractors might see a reduction in revenue.

LDOS VS S&P 500 (SPY)

Recent Community Commentary

Read the most recent pitches from players about LDOS.

Recs

1
Member Avatar TMFDeej (97.83) Submitted: 11/1/2016 9:37:53 AM : Outperform Start Price: $39.90 LDOS Score: +32.58

I was catching up on last month's Value Investor Insight this morning and I came across an interesting value investing idea in an interview with Sunjay Mishra of Tourbillon Capital Partners.

The firm likes the stock of Leidos (LDOS). There's a number of special situation aspects that attract me to this value story. The current iteration of Leidos was formed through a series of spinoffs. First back in 2013 Science Applications International Corporation or "SAIC" spun off its slower growing operations and changed the name of its remaining "good" assets to Leidos.

Flash forward to 2016 and Leidos agreed to merge through a Reverse Morris Trust with a spinoff of the Information Systems & Global Solutions division of Lockheed Martin (LMT).

There's lots of fancy investing tricks and trinkets going on here. That's the sort of thing that often leads to mispricing.

For more information on the recent merger, check out this short piece on it by the always excellent Clark Street Value:

Leidos Holdings: Reverse Morris Trust with Lockheed Martin

http://clarkstreetvalue.blogspot.com/2016/07/leidos-holdings...

LDOS' stock has sold off significantly over the past year, going from $59/share last November to its current $41 and change. Mishra believes that the recent selloff was a result of a number of reasons:

The deal spooked the market, which on the surface was understandable. It appeared Leidos paid a full multiple in an immediately dilutive transaction for a business declining at a mid-teens rate, and they went from net cash to 3.5x leverage to do so. On top of that, there was technical selling pressure from the upcoming special dividend and arb-related shorting of Leidos shares from Lockheed Martin shareholders looking to tender their stock for LDOS at a discount.

According to Clark Street, Leidos is trading at approximately 8.2x EBITDA, significantly lower than its peers despite the fact that the new merger should yield significant synergies that should help to improve Leidos' performance.

In fact, Tourbillon Capital believes that Mr. Market may be underestimating the obvious synergies associated with the recent LMT - LDOS transaction:

Through our diligence we gained comfort that the guided synergies were likely substantially understated, based on precedent transactions and our benchmarking and bottoms-up analysis of what the cost structure could be. We did a lot of background work on the CEO, who had a history of success at Boeing, and on the management team overall, which had incentives in place to underpromise and overdeliver.

Add to this the fact that almost every single analyst that I've seen talk about the defense sector expects government spending on it to increase during the next President's term in office, regardless of who wins.

Now that the theory that LDOS is current undervalued has been established, the question is...how much is the stock worth. Here's Tourbillon Capital's view on the subject:

With the stock trading at $43.90, how are you looking at valuation?

SM: We think the downside is mitigated by the fact that the shares are statistically cheap, trading at 13x consensus forward free cash flow. We consider the debt burden manageable, and the company pays the highest dividend in the peer group, approaching 3%.

Post synergies and with some growth from a cyclical uplift in defense spending, we believe Leidos can earn up to $5 per share in free cash flow in the not-distant future. At a peer multiple in the mid to high teens, that would make today’s share price an attractive entry point.

This is an interesting situation to follow. I am adding shares of LDOS in CAPS today, but do not yet own a real money position.

Jason
No position in LDOS

Recs

0
Member Avatar FighterFlash (50.44) Submitted: 11/12/2013 11:07:00 AM : Outperform Start Price: $30.63 LDOS Score: +55.57

After the breakup LDOS is winning contracts that used to be a conflict of interest. I think the LDOS part with be worth more than the saic entity.

Recs

0
Member Avatar kulls81 (79.32) Submitted: 11/29/2012 1:09:15 PM : Outperform Start Price: $20.63 LDOS Score: +119.13

Magic Formula 11-29-12

Leaderboard

Find the members with the highest scoring picks in LDOS.

Score Leader

stepnharp

stepnharp (< 20) Score: +167.67

The Score Leader is the player with the highest score across all their picks in LDOS.

Top
Pick
Member Name Member
Rating
Start
Date
Call Time
Frame
Start
Price
Stock
Gain
Index
Gain
Score Commentary
stepnharp < 20 2/23/2009 Underperform 3M $32.19 +99.88% +267.55% +167.67 0 Comment
onmyway2CPA 61.16 2/19/2009 8/19/2009 Underperform 3M $33.12 +94.22% +247.83% +153.61 0 Comment
DCD1253 < 20 3/31/2014 Outperform 5Y $22.31 +188.39% +46.47% +141.92 0 Comment
princeofprice 44.61 3/28/2014 Outperform 1Y $22.40 +187.23% +47.69% +139.54 0 Comment
JM80 < 20 5/29/2012 Outperform 5Y $18.85 +241.24% +105.31% +135.93 0 Comment
mkirkp49 59.29 7/27/2012 Outperform 3Y $19.19 +235.25% +99.72% +135.54 0 Comment
s1f2c3 23.03 12/31/2012 Outperform 3Y $19.57 +228.65% +95.75% +132.89 0 Comment
DanPicks < 20 5/14/2012 Outperform 3M $19.22 +234.77% +103.55% +131.22 0 Comment
EKnows3 44.72 12/7/2012 Outperform 5Y $19.93 +222.80% +91.81% +130.99 0 Comment
TMFAleph1 91.14 1/2/2013 Outperform 1Y $20.41 +215.23% +88.40% +126.83 0 Comment

Wall Street

See what the Wall Street professionals think, according to their public statements and filings.

Player Name Player
Rating
Start
Date
Call Time
Frame
Start
Price
Stock
Gain
S&P
Gain
Score End Date Commentary
TrackJimCramer 85.29 5/23/2017 Outperform 3W $53.01 0% 0% 0 0 Comment
TrackCreditSuiss 88.67 12/6/2012 Underperform NS $31.24 +13.02% +38.00% +24.99 10/7/2014 @ $35.31 0 Comment
TrackWellsFargo 86.67 10/4/2012 Underperform NS $20.21 +218.38% +87.72% -130.67 0 Comment
TrackJPMorgan 86.69 6/15/2012 Outperform NS $46.02 +4.13% +14.77% -10.64 2/20/2013 @ $47.92 0 Comment
TrackRaymondJame 87.60 5/29/2012 Outperform NS $18.92 +239.99% +105.31% +134.68 0 Comment
TrackRBCCapMkts 84.86 11/2/2011 Underperform NS $20.57 +212.78% +120.78% -92.00 0 Comment
TrackWWeitz 98.47 12/31/2010 Outperform NS $26.98 +138.43% +118.35% +20.09 0 Comment
TrackBBTCapMkts 80.09 1/14/2010 Outperform NS $75.84 -11.45% +13.39% -24.83 3/22/2011 @ $67.16 0 Comment
TrackJPMorgan 86.69 11/24/2008 Underperform NS $69.32 +10.96% +38.24% +27.28 1/6/2010 @ $76.92 0 Comment
TrackStifel 91.90 9/25/2008 Outperform NS $79.64 -32.50% +2.37% -34.86 9/1/2011 @ $53.76 0 Comment
TrackCowenandCo 77.72 9/22/2008 Outperform NS $34.62 +85.83% +126.84% -41.01 0 Comment
TrackWellsFargo 86.67 9/4/2008 Outperform NS $80.84 -11.63% -8.04% -3.59 3/31/2010 @ $71.44 0 Comment
TrackJesupLamont 69.81 6/4/2008 Outperform NS $34.55 +86.20% +105.63% -19.43 0 Comment
TrackJPMorgan 86.69 1/10/2008 Outperform NS $77.96 +3.39% -6.48% +9.87 6/24/2008 @ $80.60 0 Comment
TrackJefferies 80.47 12/11/2007 Outperform NS $34.65 +85.64% +88.26% -2.62 0 Comment
TrackRonBaron 80.37 9/30/2007 Outperform NS $32.64 +97.06% +87.73% +9.33 1 Comment
TrackEinhorn 93.56 9/30/2007 Outperform NS $76.76 +1.77% -16.48% +18.25 8/27/2008 @ $78.12 2 Comments
TrackCowenandCo 77.72 6/11/2007 Outperform NS $74.28 +7.00% -18.95% +25.95 7/16/2008 @ $79.48 0 Comment
TrackJimCramer 85.29 1/25/2007 Underperform 3W $32.17 +69.92% +69.91% -0.01 5/23/2017 @ $54.67 0 Comment
TrackJimCramer 85.29 10/13/2006 Outperform 3W $72.72 +0.88% +4.27% -3.39 1/26/2007 @ $73.36 0 Comment

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