Value
7.9/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 8.5 |
| P/S | 9.9 |
| EV/EBITDA | 6.0 |
| Fwd P/E | 9.3 |
| PEG | 10.0 |
| Analyst target | 4.0 |
- ▸Forward P/E: 10.1x
- ▸PEG: 0.12
- ▸Attractively valued
SAIC · Why this verdict
Why Science Applications Internatio (SAIC) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.6/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Approximately 98% of SAIC's revenue comes from U.S. government customers, with 52% from the Department of Defense alone, creating extreme exposure to federal budget cycles, continuing resolutions, and program priority shifts that are outside management's control. Bear case | No major contract cancellations or funding reductions exceeding 10% of total revenue are announced in the next 12 months. | →Stable |
| CounterGovernment IT services contracts are typically multi-year with established funding streams, providing revenue visibility superior to commercial IT services, where clients can cancel at shorter notice. | ||
With a PEG ratio of 0.12 and a forward P/E of 9.9x, SAIC trades at a substantial discount to earnings growth potential, suggesting the market is not fully crediting the earnings acceleration visible in recent quarters. Valuation breakdown | Forward P/E multiple expands toward 13x within 12 months as sustained earnings beats rebuild investor confidence. | →Stable |
| CounterGovernment IT services companies have traded at chronically low multiples for decades because of political risk and budget visibility constraints, making multiple expansion difficult to sustain absent a structural re-rating. | ||
SAIC beat earnings estimates in all four of the last quarters with an average positive surprise of 38.6%, including a 62% beat, demonstrating that conservative management guidance and disciplined contract execution consistently produce results above analyst expectations. Earnings | The earnings beat streak extends to 6 consecutive quarters with average positive surprise remaining above 20%. | →Stable |
| CounterGovernment IT contract revenue is subject to program delays, continuing resolutions, and budget sequestration; a single large contract delay can cause significant earnings misses regardless of execution quality. | ||
SAIC generates a return on equity of 28% with strong free cash flow conversion at 72% of net income, indicating the business creates substantial returns on the capital it deploys despite operating in a competitive government contracting environment. Quality breakdown | Return on equity remains above 20% for at least 3 of the next 4 reporting periods, confirming capital efficiency. | →Stable |
| CounterHigh ROE in government services often reflects low capital intensity combined with leverage rather than genuine operational superiority, and may be vulnerable if contract profitability compresses under budget pressure. | ||
Approximately 98% of SAIC's revenue comes from U.S. government customers, with 52% from the Department of Defense alone, creating extreme exposure to federal budget cycles, continuing resolutions, and program priority shifts that are outside management's control.
→StableBear case
- Expectation
- No major contract cancellations or funding reductions exceeding 10% of total revenue are announced in the next 12 months.
CounterGovernment IT services contracts are typically multi-year with established funding streams, providing revenue visibility superior to commercial IT services, where clients can cancel at shorter notice.
With a PEG ratio of 0.12 and a forward P/E of 9.9x, SAIC trades at a substantial discount to earnings growth potential, suggesting the market is not fully crediting the earnings acceleration visible in recent quarters.
→StableValuation breakdown
- Expectation
- Forward P/E multiple expands toward 13x within 12 months as sustained earnings beats rebuild investor confidence.
CounterGovernment IT services companies have traded at chronically low multiples for decades because of political risk and budget visibility constraints, making multiple expansion difficult to sustain absent a structural re-rating.
SAIC beat earnings estimates in all four of the last quarters with an average positive surprise of 38.6%, including a 62% beat, demonstrating that conservative management guidance and disciplined contract execution consistently produce results above analyst expectations.
→StableEarnings
- Expectation
- The earnings beat streak extends to 6 consecutive quarters with average positive surprise remaining above 20%.
CounterGovernment IT contract revenue is subject to program delays, continuing resolutions, and budget sequestration; a single large contract delay can cause significant earnings misses regardless of execution quality.
SAIC generates a return on equity of 28% with strong free cash flow conversion at 72% of net income, indicating the business creates substantial returns on the capital it deploys despite operating in a competitive government contracting environment.
→StableQuality breakdown
- Expectation
- Return on equity remains above 20% for at least 3 of the next 4 reporting periods, confirming capital efficiency.
CounterHigh ROE in government services often reflects low capital intensity combined with leverage rather than genuine operational superiority, and may be vulnerable if contract profitability compresses under budget pressure.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Science Applications International's perfect four-quarter earnings beat streak with an average 38.6% positive surprise and a PEG of 0.12 make a compelling valuation case, but near-complete revenue concentration in U.S. government contracts creates binary risk from budget negotiations and program cancellations.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
4.8/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 9.2 |
| ROA | 4.6 |
| Gross margin | 0.0 |
| Op margin | 3.5 |
| Net margin | 2.8 |
| Current ratio | 4.5 |
| FCF quality | 7.2 |
| Moat | 4.9 |
| Piotroski F | 6.7 |
- ▸Excellent ROE: 28%
- ▸No competitive moat
Growth
6.5/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 2.9 |
| EPS growth | 10.0 |
Momentum
3.3/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 0.0 |
| OBV | 1.0 |
| MA position | 8.0 |
| Volume | 1.9 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-MA but MA slope flat
Sentiment
5.5/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 6.3 |
| erm sentiment | 5.2 |
Insider
5.1/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.2 |
- ▸Negligible insider buying — $9,496 (0.000% of mkt cap)
Peer rank
3.9/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 6.9 |
| quality rank | 5.8 |
| growth rank | 3.0 |
Technical
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 4.4 |
| support resistance | 3.7 |
| 52w position | 8.0 |
Risk (lower is worse)
5.9/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 6.3 |
| days to cover | 5.9 |
| volatility | 2.1 |
| put call | 10.0 |
| implied vol | 3.8 |
| beta | 10.0 |
| debt equity | 3.2 |
- ▸Concentration risks: 2 HIGH (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
7.0/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
| dividend safety | 5.2 |
- ▸Perfect beat streak: 4Q
- ▸Dividend: 133.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (5)
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:62d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- MOMENTUM:3.3<4.5
- ASYMMETRY:-0.5=NEGATIVE
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
-0.46
Upside
-5.3%
Downside
11.4%
Sizing output
AVOID
SetupRange Bound — RSI 45 mid-range, Bollinger mid-band
EdgeNo clear edge — No clear edge identified
SuitabilityAggressive — MCap $4.7B<$5B
Investment implication
The F-path SELL output reflects an overall score of 4.6 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Value at 7.9) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( MOMENTUM:3.3<4.5, ASYMMETRY:-0.5=NEGATIVE) reinforce the read. Current asymmetry R:R is -0.46 — supplementary context, not the trigger for this path.
The strongest dimensions are Value at 7.9, Catalyst at 7.0, and Growth at 6.5; the weakest are Momentum at 3.3, Peer rank at 3.9, and Quality at 4.8. The V9 engine flagged 2 failed gates with 1 warning, producing an asymmetric reward-to-risk of -0.46 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Consistent Earnings Beats
Trip ifEPS surprise falls below 0% in at least 2 of the next 4 quarters.
- P2Government Concentration Binary Risk
Trip ifA contract cancellation or funding reduction exceeding 5% of annual revenue is publicly announced.
- P3Attractive Peg Ratio
Trip ifForward P/E multiple compresses below 8x or earnings estimates decline more than 10% from current consensus.
- P4Roe Quality Strength
Trip ifReturn on equity falls below 15% for at least 2 consecutive reporting periods.