BAH - Embedded Expectations Analysis - 2020 07 09
Booz Allen Hamilton Holding Corporation (BAH:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) earnings, with a 20.8x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management may be concerned about their margin outlook, their resilience program, and other initiativesSpecifically, management may lack confidence in their ability to meet their adjusted EBITDA margin guidance of approximately 10%, sustain their fiscal year 2020 performance, and in their ability to better retain employees with their resilience program. Furthermore, they may be exaggerating the potential and progress of their non-labor-based initiatives, and may be concerned about the sustainability of integrated technology demand and their liquidity position. Management may also lack confidence in their ability to execute their safe return initiative and allocate their resources efficiently, and might have concerns about the outcome of aggressive pursual of new work. In addition, they may have concerns about the value of their $100mn pandemic resilience fund and potential internal strategic changes. Finally, they may be exaggerating their investment in virtual learning, and they may have concerns about their ability to sustain overall growth
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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