Leidos: Under-the-Radar Defense Play
12/02/2016 7:00 am EST
In a new Trump administration is looks like defense stocks will be a pretty safe bet, as our military-industrial complex continues to grow, asserts growth stock expert Briton Ryle, editor of The Wealth Advisory.
However, many have hit new highs after investors piled in to capture the Trump-related profits. That being said, there are some relatively unknown players in the game.
Leidos Holdings (LDOS) the sixth-biggest government contractor. In 2013, the U.S. government had obligations worth well over $6 billion with Leidos, and the company performed over 30,000 contract-related actions.
Leidos is an applied technologies company. That means it provides high-tech solutions to some of the toughest problems facing governments and commercial companies -- solutions like biomedical research, explosives detection systems, cyber security, energy, infrastructure, and health.
And this company doesn’t just rely on the U.S. government for its revenues. Leidos counts most of the biggest oil companies in the world as customers. It also provides support for U.S. allies such as the UK and Canadian governments.
Leidos pays one of the largest dividends in the industry, trades at a price-to-book discount of 60% compared to the rest of the industry and trades at a substantial price-to-sales discount — 59% to be specific.
Leidos’ free cash flow has increased by two-thirds since 2013 (when it was making over $6 billion from the U.S. government alone). And last quarter, it grew revenues year over year by more than 43%.
That’s a figure that will jump even more as the Republicans reduce the federal workforce and the government has to rely more on contracting companies like Leidos for staffing solutions.
With everything going right for Leidos’ top line and an already attractive stock price, this little-known contractor is primed to make waves as it capitalizes on all of the growing trends around it.
By Briton Ryle, editor of The Wealth Advisory