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    LDOS · NYQ · Technology

    Leidos Holdings, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 201.99

    Market price

    USD 127.69

    Implied upside

    +58.2%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedReported capital expenditure averages just 0.96% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.00% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.

    Value Per Share

    Perpetuity growth
    USD 201.99+58.2%
    Exit multiple
    USD 150.85+18.1%
    Market price
    USD 127.69

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 18.2bnUSD 19.3bnUSD 20.5bnUSD 21.7bnUSD 23.0bn+6.1%
    EBITUSD 1.8bnUSD 1.9bnUSD 2.0bnUSD 2.1bnUSD 2.3bn+6.1%
    NOPATUSD 1.4bnUSD 1.5bnUSD 1.6bnUSD 1.7bnUSD 1.8bn+6.1%
    Add depreciation & amortisationUSD 359.1mUSD 380.9mUSD 403.9mUSD 428.4mUSD 454.4m+6.1%
    Less capital expenditureUSD -182.1mUSD -193.2mUSD -204.9mUSD -217.3mUSD -230.5m+6.1%
    Less increase in working capitalUSD -38.6mUSD -40.9mUSD -43.4mUSD -46.1mUSD -48.8m+6.1%
    Free cashflow to firmUSD 1.6bnUSD 1.7bnUSD 1.8bnUSD 1.9bnUSD 2.0bn+6.1%
    Discount factor0.96360.89470.83080.77140.7163-
    Present valueUSD 1.5bnUSD 1.5bnUSD 1.5bnUSD 1.4bnUSD 1.4bn-1.5%
    Present Value Of The ForecastUSD 7.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.713Reported 0.572, pulled toward 1.0 (Blume)
    Cost of equity8.92%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 16.0bn75.4% of capital
    Total debtUSD 5.2bn24.6% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC7.70%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 201.99

    76% of EV

    Forecast FCFF, final year
    USD 2.0bn
    Capex at depreciation, working capital in reinvestment
    USD 2.0bn
    Less reinvestment at g/ROIC (18.3% of NOPAT)
    USD -365.6m
    Capitalised
    USD 1.6bn
    ROIC (reported)
    13.7%
    Terminal value, undiscounted
    USD 32.3bn
    Terminal value, discounted
    USD 23.1bn
    Enterprise value
    USD 30.4bn
    Less net debt
    USD 4.1bn
    Equity value
    USD 26.3bn

    Exit at 8.4x EBITDA

    Value per shareUSD 150.85

    69% of EV

    Terminal value, undiscounted
    USD 23.0bn
    Terminal value, discounted
    USD 16.5bn
    Enterprise value
    USD 23.7bn
    Less net debt
    USD 4.1bn
    Equity value
    USD 19.6bn

    Spread between methods: 29%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.70%285.27309.57341.33384.71447.64
    6.70%225.53238.78255.10275.71302.65
    7.70%185.04192.81201.99213.04226.62
    8.70%155.80160.53165.97172.29179.75
    9.70%133.67136.61139.91143.65147.93

    Outlined: this model. Green text: above today's price of 127.69. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year6.1%-2.9%-9.0pp
    EBIT margin9.9%6.4%-3.5pp
    Discount rate7.7%10.3%+2.6pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.