Back to top

Image: Shutterstock

Reasons to Hold Booz Allen Hamilton (BAH) in Your Portfolio

Read MoreHide Full Article

Shares of Booz Allen Hamilton Holding Corporation (BAH - Free Report) have gained 21% over the past year, outperforming the 5.2% growth of the industry it belongs to.

The company has an expected long-term (three to five years) EPS growth rate of 7.5%. Its earnings for fiscal 2023 and 2024 are anticipated to grow 3.6% and 10.5%, respectively, year over year.

Factors that Bode Well

Vision 2020 was Booz Allen’s transformation strategy for creating sustainable expansion. The strategy focused on getting closer to clients’ core missions, increasing the technical content of work, attracting and retaining talent from diverse areas of expertise, increasing innovation, creating a wide network of external partners and alliances, and expanding into commercial and international business. Its implementation has accelerated the company’s organic revenue growth, strengthened its profitability position, and fetched significant headcount and backlog growth.

The company’s next strategy, VoLT, focuses on integrating velocity, leadership and technology in the process of transformation. Key focus areas on the velocity front are increasing innovation, strengthening market position through mergers, acquisitions and partnerships, and client-centric decision-making. The leadership front involves initiatives to promptly utilize leadership in identifying client needs and scaling businesses. On the technology front, the company focuses on developing and expanding next-generation technology and solutions.

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

Some Risks

Booz Allen's current ratio (a measure of liquidity) at the end of first-quarter fiscal 2023 was 1.6, lower than the prior-year quarter’s 1.81. A decline in the current ratio is not desirable as it indicates that the company may have problems meeting its short-term debt obligations.

Zacks Rank and Stocks to Consider

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

A couple of better-ranked stocks in the broader Zacks  Business Services sector are H&R Block (HRB - Free Report) and Genpact (G - Free Report) .

H&R Block currently flaunts a Zacks Rank #1 (Strong Buy). HRB has a long-term earnings growth expectation of 12.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

HRB delivered a trailing four-quarter earnings surprise of 19.2%, on average.

Genpact carries a Zacks Rank #2 (Buy), at present. G has a long-term earnings growth expectation of 12.1%.

Genpact delivered a trailing four-quarter earnings surprise of 10.1%, on average.

Published in