Booz Allen Hamilton Holding Corporation’s (BAH - Free Report) price trend reveals that the stock has had an impressive run on the bourse so far this year, having gained 38.4% compared with the industry’s rally of 23.4%.
With a long-term expected EPS growth rate of 14.6% and a market cap of $8.8 billion, Booz Allen seems to be a stock that investors should retain in their portfolios.
What’s Favoring the Company?
Booz Allen’s top line continues to grow, driven by continued strong demand for its services and solutions and increase in headcount. Top-line growth, strong contract level performance and operational management are contributing significantly to bottom-line growth.
Notably, the company has updated its three-year adjusted EPS goal. For the period from fiscal 2018 through fiscal 2021, Booz Allen now targets adjusted EPS growth of 66% compared with the previous target of 50%. It expects dividend yield of approximately 2%, supported by 6%-9% annual revenue growth, low 10% range adjusted EBITDA margin and $1.4 billion in capital deployment.
Booz Allen is currently executing Vision 2020, a strategy focused on getting closer to clients’ core missions, increasing technical content of work, attracting and retaining talent from diverse areas of expertise, increasing innovation, creating a wide network of external partners and alliances as well as expanding into commercial and international businesses.
Booz Allen Hamilton Holding Corporation Revenue (TTM)
The company is seeing higher backlog growth, a shift in talent to more technical expertise and strong performance in the global commercial market. Increased focus on innovation areas such as machine intelligence and directed energy is helping the company receive contracts for highly technical and mission-critical work.
Despite riding on significant growth prospects, Booz Allen is not free from headwinds. The company is witnessing acceleration in costs as it has increased investments in facilities, systems, infrastructure and technology. It has a highly leveraged balance sheet. Nevertheless, we believe that healthy contract level performance and strong operational management bode well for the long term.
Zacks Rank and Stocks to Consider
Currently, Booz Allen has a Zacks Rank #3 (Hold).
Some top-ranked stocks in the broader Zacks Business Services sector are Navigant Consulting , WEX (WEX - Free Report) and FLEETCOR Technologies (FLT - Free Report) . While Navigant Consulting sports a Zacks Rank #1 (Strong Buy), WEX and FLEETCOR carry a Zacks Rank #2 (Buy).
Long-term expected EPS (three to five years) growth rate for Navigant Consulting, WEX and FLEETCOR is 13.5%, 15% and 16.5%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.
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