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Reasons to Retain Booz Allen (BAH) Stock in Your Portfolio

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Booz Allen Hamilton Holding Corporation (BAH - Free Report) has an impressive Growth Score of A. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of the quality and sustainability of its growth.

The company has an expected long-term earnings per share (three to five years) growth rate of 10.6%. Further, earnings are anticipated to register 13.8% growth in fiscal 2021 and 13.1% in fiscal 2022.

Shares of Booz Allen have gained 18.6% in the past year compared with the industry’s growth of 6.2%.

 

Driving Factors

Booz Allen has a large addressable market as it serves the U.S. government,  one of the world’s largest consumers of technology and management-consulting services. Also, the agencies of the U.S. intelligence community offer an additional market. Further, the company has a lot of opportunities in global commercial markets where it has relatively low penetration.

Booz Allen’s organic revenue and profitability positions remain robust as the company continues with its headcount- and backlog-growth efforts in accordance with the Vision 2020 transformation strategy. Notably, Booz Allen’s adjusted EPS of 93 cents jumped 12% year over year in the last-reported quarter. Revenues, backlog and headcount surged a respective 7.1%, 15.9% and 3.8%.

Booz Allen is focussing on areas such as artificial intelligence, advanced engineering, directed energy and modern digital platformsto drive innovation. It is developing mechanics and infrastructure for new and disruptive business models to enhance service quality and client satisfaction. Transformative solutions created by such efforts are expected to significantly enhance future revenue opportunities of the company.

Some Risks

Booz Allen's total-debt-to-total-capital ratio of 0.73 was higher than the industry’s 0.63 at the end of first-quarter fiscal 2021. A high debt-to-capitalization ratio indicates that the proportion of debt to finance assets is on the rise.

Further, cash and cash equivalent balance of $621 million at the end of quarter was well below the debt level of $2.3 billion, underscoring that the company doesn’t have enough cash to meet this debt burden. The cash level can, however, meet the short-term debt of $128 million.

Zacks Rank and Stocks to Consider

Booz Allen currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader Zacks Business Services sector are BG Staffing (BGSF - Free Report) , CoreLogic and Sykes Enterprises , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank  stocks here.

Long-term earnings (three to five years) growth rate for BG Staffing, CoreLogic and Sykes Enterprise is estimated at 20%, 12% and 8%, respectively.

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