Over the last six months, Booz Allen Hamilton’s shares have sunk to $102.93, producing a disappointing 11.7% loss - a stark contrast to the S&P 500’s 17.5% gain. This might have investors contemplating their next move.

Following the pullback, is now an opportune time to buy BAH? Find out in our full research report, it’s free.

Why Does BAH Stock Spark Debate?

With roots dating back to 1914 and deep ties to nearly all U.S. cabinet-level departments, Booz Allen Hamilton (NYSE: BAH) provides management consulting, technology services, and cybersecurity solutions primarily to U.S. government agencies and military branches.

Two Positive Attributes:

1. Core Business Firing on All Cylinders

Investors interested in Government & Technical Consulting companies should track organic revenue in addition to reported revenue. This metric gives visibility into Booz Allen Hamilton’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.

Over the last two years, Booz Allen Hamilton’s organic revenue averaged 10.7% year-on-year growth. This performance was impressive and shows it can expand quickly without relying on expensive (and risky) acquisitions.

2. Outstanding Long-Term EPS Growth

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Booz Allen Hamilton’s EPS grew at a spectacular 14.6% compounded annual growth rate over the last five years, higher than its 9.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

One Reason to be Careful:

Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Booz Allen Hamilton’s revenue to rise by 2.6%, a deceleration versus its 9.5% annualized growth for the past five years. This projection is underwhelming and indicates its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.

Final Judgment

Booz Allen Hamilton’s merits more than compensate for its flaws. After the recent drawdown, the stock trades at 15.5× forward P/E (or $102.93 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

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