Booz Allen Hamilton Holding Corp (BAH) Stock Analysis
Booz Allen Hamilton Holding Corp (BAH) Stock Analysis
Overall Grade: F (Concerning)
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Booz Allen Hamilton Holding Corp faces challenges in financial performance that warrant careful analysis.
Key Metrics:
| Metric | Value | Context |
|---|---|---|
| ROIC | 20.2% | Above industry average |
| FCF Margin | 8.2% | Healthy cash flow |
| Debt/Equity | 3.8x | Elevated debt |
Investment Thesis: Strong return on invested capital of 20.2% suggests durable competitive advantages and efficient capital allocation.
What is Booz Allen Hamilton Holding Corp's Profitability and ROIC?
Booz Allen Hamilton Holding Corp generates strong returns on invested capital at 20.2%, indicating efficient capital allocation and competitive advantages. Gross margin of 52.7% with operating margin at 9.2% reflects the company's strong market position.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 20.2% | Excellent | Strong capital efficiency |
| Return on Equity (ROE) | 80.3% | Excellent | Efficient use of shareholder equity |
| Gross Margin | 52.7% | Excellent | Strong pricing power |
| Operating Margin | 9.2% | Adequate | Moderate operational efficiency |
How Strong is Booz Allen Hamilton Holding Corp's Cash Flow Quality?
Booz Allen Hamilton Holding Corp generated $933.0M in free cash flow over the trailing twelve months, representing a 8.2% margin. Cash earnings quality is strong, with operating cash flow exceeding net income by 1.2x.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Free Cash Flow Margin | 8.2% | Adequate | Healthy cash generation |
| Free Cash Flow (TTM) | $933.0M | Good | Positive cash generation |
| OCF/Net Income | 1.2x | Excellent | High earnings quality |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
What is Booz Allen Hamilton Holding Corp's Financial Health?
Booz Allen Hamilton Holding Corp's debt-to-equity ratio of 3.8x indicates elevated leverage.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Debt to Equity | 3.8x | Red flag | Elevated leverage |
| Net Cash Position | $-3.1B | Warning | Net debt position |
Is Booz Allen Hamilton Holding Corp Stock Overvalued or Undervalued?
Booz Allen Hamilton Holding Corp trades at a P/E of 12.5x, representing a premium to the sector median of N/A. Free cash flow yield of 9.0% offers attractive cash returns.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| P/E Ratio | 12.5x | Adequate | Reasonable valuation |
| EV/Sales | 1.2x | Excellent | Attractive revenue multiple |
| FCF Yield | 9.0% | Excellent | Attractive cash return |
| Dividend Yield | 2.6% | Adequate | Growth focus over income |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 20.2% | Top 25% | 2.5x above |
| Free Cash Flow Margin | 8.2% | Top 50% | 1.5x above |
| Gross Margin | 52.7% | Top 25% | 1.6x above |
| Operating Margin | 9.2% | Top 50% | 1.1x above |
| Return on Equity (ROE) | 80.3% | Top 5% | 9.0x above |
| P/E Ratio | 12.5x | N/A | - |
Rating Thresholds
Return on Invested Capital (ROIC)
Measures how efficiently a company uses its debt and equity capital to generate profits. ROIC above 15% typically indicates a competitive moat.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Exceptional capital efficiency, strong competitive moat |
| Good | 12% - 20% | Above-average returns, sustainable competitive position |
| Adequate | 8% - 12% | Around cost of capital, moderate competitive position |
| Warning | 4% - 8% | Below cost of capital, value may be eroding |
| Red flag | < 4% | Significant capital destruction, fundamental issues |
Current: 20.2% (Excellent - Top 25% of sector (median: 8.0%))
Free Cash Flow Margin
The percentage of revenue converted to free cash flow. Higher margins indicate stronger cash generation and business quality.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Strong cash generation, high-quality business |
| Good | 10% - 20% | Healthy cash conversion |
| Adequate | 5% - 10% | Moderate cash generation |
| Warning | 0% - 5% | Thin cash margins, capital intensive |
| Red flag | < 0% | Cash burn, potential liquidity concerns |
Current: 8.2% (Adequate - Top 50% of sector (median: 5.4%))
Gross Margin
Revenue minus cost of goods sold as a percentage. Higher gross margins indicate pricing power and competitive advantage.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 50% | Strong pricing power and competitive moat |
| Good | 30% - 50% | Healthy margins, differentiated product |
| Adequate | 20% - 30% | Moderate margins, competitive industry |
| Warning | 10% - 20% | Thin margins, commodity-like business |
| Red flag | < 10% | Very thin margins, structural challenges |
Current: 52.7% (Excellent - Top 25% of sector (median: 33.4%))
Debt to Equity Ratio
Total debt divided by shareholders' equity. Lower ratios indicate more conservative financing and reduced financial risk.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 0.3x | Conservative leverage, strong balance sheet |
| Good | 0.3x - 0.7x | Moderate leverage, healthy financial position |
| Adequate | 0.7x - 1.5x | Elevated leverage, monitor closely |
| Warning | 1.5x - 3.0x | High leverage, increased financial risk |
| Red flag | > 3.0x | Excessive leverage, potential distress risk |
Current: 384.4% (Red flag)
P/E Ratio (Price-to-Earnings)
Stock price divided by earnings per share. Lower P/E may indicate undervaluation, while higher P/E suggests growth expectations.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 15x | Attractively valued, potential opportunity |
| Good | 15x - 25x | Fair value for quality company |
| Adequate | 25x - 35x | Growth premium, justify with earnings growth |
| Warning | 35x - 50x | High expectations priced in |
| Red flag | > 50x or negative | Speculative valuation or losses |
Current: 12.5x (Adequate)
Free Cash Flow Yield
Free cash flow per share divided by stock price. Higher FCF yield indicates better cash return relative to valuation.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 8% | High cash return, potential value opportunity |
| Good | 5% - 8% | Solid cash yield |
| Adequate | 3% - 5% | Moderate cash return |
| Warning | 1% - 3% | Low cash yield, growth expectations |
| Red flag | < 1% | Minimal cash return to shareholders |
Current: 9.0% (Excellent)
Frequently Asked Questions
Q: What is Booz Allen Hamilton Holding Corp's Return on Invested Capital (ROIC)?
Booz Allen Hamilton Holding Corp (BAH) has a trailing twelve-month Return on Invested Capital (ROIC) of 20.2%. This compares above the sector median of 8.0%. An ROIC above 20% indicates exceptional capital efficiency and strong competitive advantages.
Q: What is Booz Allen Hamilton Holding Corp's Free Cash Flow Margin?
Booz Allen Hamilton Holding Corp (BAH) has a free cash flow margin of 8.2%, generating $933.0 million in free cash flow over the trailing twelve months. A FCF margin between 5-10% is typical for capital-intensive businesses.
Q: Is Booz Allen Hamilton Holding Corp stock overvalued or undervalued?
Booz Allen Hamilton Holding Corp (BAH) trades at a P/E ratio of 12.5x, which is above the sector median of N/A. The EV/Sales multiple is 1.2x. Free cash flow yield is 9.0%, which represents an attractive cash return to investors.
Q: Does Booz Allen Hamilton Holding Corp pay a dividend?
Booz Allen Hamilton Holding Corp (BAH) currently pays a dividend yield of 2.6%. Including share buybacks, the total shareholder yield is 10.6%. This yield is moderate, suggesting a balance between income and growth reinvestment.
Q: How much debt does Booz Allen Hamilton Holding Corp have?
Booz Allen Hamilton Holding Corp (BAH) has a debt-to-equity ratio of 3.8x with total debt of $3.9 billion. Net debt position is $3.1 billion.
Q: What is Booz Allen Hamilton Holding Corp's revenue and earnings growth?
Booz Allen Hamilton Holding Corp (BAH) declined revenue by 3.1% year-over-year. Earnings per share increased by 0.4% compared to the prior year. Revenue decline may indicate market challenges or industry headwinds.
Q: Is Booz Allen Hamilton Holding Corp buying back stock?
Booz Allen Hamilton Holding Corp (BAH) repurchased $836.0 million of stock over the trailing twelve months. This represents a buyback yield of 8.0%.
Q: How does Booz Allen Hamilton Holding Corp compare to competitors in Industrials?
Compared to other companies in Industrials, Booz Allen Hamilton Holding Corp (BAH) shows: ROIC of 20.2% is above the sector median of 8.0% (Top 14%). FCF margin of 8.2% exceeds the sector median of 5.4% (Top 37% of sector). Gross margin at 52.7% is 19.3 percentage points higher than sector peers. These rankings are based on MetricDuck's analysis of all Industrials companies with available SEC filings.
Q: What warning signs should I watch for with Booz Allen Hamilton Holding Corp?
Investors in Booz Allen Hamilton Holding Corp (BAH) should monitor these potential warning signs: 1) Debt-to-equity of 3.8x is elevated. Regular monitoring of SEC filings and quarterly trends is recommended.
Data Source: Data sourced from 10-Q filed 2025-10-24. TTM metrics as of Q4 2025.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
This analysis is for informational purposes only and does not constitute investment advice.