Is It Time To Look Closer At Science Applications International (SAIC) After Recent Share Price Weakness

• This article examines whether Science Applications International might represent value at its current share price by walking through what the numbers are actually indicating about the stock.
• With a share price of US$95.71 and a 16.5% gain over five years, recent returns have been softer, with the stock down 0.5% over the past week, 1.2% over the past month, 5.4% year to date and 19.0% over the last year.
• Recent headlines around Science Applications International have focused on its role as a major government and commercial contractor, including continued work in areas such as IT modernization, engineering services and mission support. This context helps explain why the stock has attracted mixed sentiment, even as it remains a key player in its sector.
• Simply Wall St currently gives Science Applications International a valuation score of 5 out of 6. This sets the stage for a closer look at how different valuation methods compare and how a broader narrative-based view can add an extra layer of insight later in the article.

Find out why Science Applications International's -19.0% return over the last year is lagging behind its peers.

Approach 1: Science Applications International Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company might be worth today by projecting its future cash flows and discounting them back to a present value.

For Science Applications International, the model uses a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month free cash flow is about $578 million. Analyst and extrapolated projections suggest annual free cash flow figures in the $580 million to about $586 million range over the coming decade, with a specific estimate of $561 million in 2029. Simply Wall St discounts these future cash flows to today using its own assumptions.

On this basis, the DCF model estimates an intrinsic value of about $200.23 per share. Compared with the current share price of US$95.71, this implies the stock is about 52.2% undervalued according to these inputs and assumptions.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Science Applications International is undervalued by 52.2%. Track this in your watchlist or portfolio, or discover 61 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Science Applications International.

Approach 2: Science Applications International Price vs Earnings

For a profitable company, the P/E ratio is a simple way to see how much you are paying for each dollar of earnings. This makes it a useful cross check against a DCF model. Higher growth expectations or lower perceived risk tend to justify a higher “normal” P/E, while slower growth or higher risk usually align with a lower multiple.

Science Applications International currently trades on a P/E of 11.61x. This sits below the Professional Services industry average P/E of 19.69x and also below the peer group average of 32.81x. Simply Wall St’s Fair Ratio for the stock is 15.33x, which reflects the P/E that might be considered appropriate given factors such as its earnings profile, industry, profit margins, size and risk characteristics.

The Fair Ratio is generally more tailored than a simple comparison with peers or the broad industry because it tries to account for company specific features rather than assuming all firms should trade on the same headline multiple. Comparing Science Applications International’s current P/E of 11.61x with the Fair Ratio of 15.33x suggests the shares trade at a discount on this metric.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Science Applications International Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Here is an introduction to Narratives, which let you attach a clear story about Science Applications International to the numbers you see, by linking your view of future revenue, earnings and margins to a fair value that can be compared with today’s share price.

A Narrative on Simply Wall St’s Community page is an accessible tool that helps you spell out why you think the company looks attractive or risky, ties that story to a specific financial forecast, and then shows the implied fair value so you can judge whether the current price looks high or low relative to your expectations.

Because Narratives update automatically when new information such as earnings, guidance or contract news comes in, you can see in real time how a more optimistic view, such as a fair value of about US$130.00, and a more cautious view, such as a fair value of about US$86.80, reflect very different assumptions about Science Applications International and lead to different conclusions on whether the gap between price and fair value is wide enough for you to consider buying, holding or selling.

For Science Applications International, we will make it really easy for you with previews of two leading Science Applications International Narratives:

🐂 Science Applications International Bull Case

Fair value in this bullish narrative: US$130.00 per share

Implied discount to this fair value versus the last close of US$95.71: about 26.4% undervalued

Revenue growth assumption used: 1.52% per year

• Assumes steady revenue growth supported by demand for digital modernization, national security work and a large backlog of government related contracts.
• Builds in slightly higher profit margins over time, helped by a tilt toward higher margin, asset light work and an expanding commercial segment.
• Arrives at a US$130.00 fair value by pairing those earnings and margin assumptions with a higher future P/E than today, while still using a discount rate of 8.71%.

🐻 Science Applications International Bear Case

Fair value in this bearish narrative: about US$86.80 per share

Implied premium to this fair value versus the last close of US$95.71: about 10.3% overvalued

Revenue growth assumption used: 2.02% annual decline

• Focuses on contract risk, procurement changes and lost work such as the NASA program as potential headwinds for future revenue and earnings.
• Assumes pressure on growth and some caution around margins, even though certain contracts and commercial opportunities still support earnings in the model.
• Arrives at a US$86.80 fair value by pairing lower revenue expectations with a modest future P/E of about 12.74x and a higher discount rate of roughly 8.50%.

Taken together, these Narratives show how different views on contract wins, federal IT spending and margin resilience can lead to very different fair values. Your next step is to decide which story feels closer to how you see Science Applications International today and adjust the numbers to match your own expectations.

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Science Applications International on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

Do you think there's more to the story for Science Applications International? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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