BAH - Embedded Expectations Analysis - 2020 07 01
Booz Allen Hamilton Holding Corporation (BAH:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) earnings, with a 19.6x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management may be concerned about revenue growth, EPS guidance, and their portfolio opportunitiesSpecifically, management may lack confidence in their ability to meet their EPS and revenue guidance and continue to invest ahead of the market. Furthermore, they may be exaggerating the sustainability of their leading market position, their ability to entice clients with their innovation capabilities, and the opportunities across their portfolio. In addition, management may lack confidence in their ability to sustain revenue growth, particularly in their defense segment, improve adjusted EBITDA margins, and maintain strong win rates. Finally, they may be concerned about the federal contract duration and their ability to onboard talent during the pandemic
Booz Allen Hamilton Holding is a holding company. The company provides management and technology consulting, analytics, engineering, digital solutions, mission operations, and cyber knowledge to U.S. and international governments, corporations, and non-profit organizations. The company's services are: Consulting, which focuses on solving client problems and developing mission-oriented solutions; Analytics, which includes decision analytics, automation, and data science solutions; Digital Solutions, which develops, designs, and implements solutions; Engineering, which delivers engineering services and solutions; and Cyber, which focuses on active prevention, detection, and cost effectiveness.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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