Booz Allen Hamilton Holding Corporation BAH benefits from its large addressable market as well as Vision 2020.
The company has an expected long-term (three to five years) EPS growth rate of 8.9%. Earnings for fiscal years 2023 and 2024 are expected to grow 5.9% and 9.2% year over year, respectively. BAH’s shares are up 14.4% over the past year, compared to 15.4% growth for the industry of which it is a part.
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Factors that bode well
Vision 2020 was Booz Allen’s transformational strategy to create sustainable expansion. The strategy focused on getting closer to customers’ core tasks, increasing the technical content of the work, attracting and retaining talent from different fields, increasing innovation, creating a wide network of external partners and alliances, and entering the commercial and to expand international business.
Its implementation has accelerated the company’s organic revenue growth, strengthened its profitability position and resulted in significant growth in headcount and backlog.
Booz Allen Hamilton has engineered its solutions business to create differentiated business models and distribution channels, increasing customer acquisition and improving future revenue opportunities. The company also differentiated itself in the talent marketplace to ensure it attracted and retained high caliber talent across disciplines.
These initiatives enhanced its ability to provide a variety of offerings that enabled it to attract highly technical, mission-critical work to its government business. All this ensures long-term sustainable growth of the company.
Some risks
The Booz Allen Current Ratio (a measure of liquidity) was 1.44 at the end of the third quarter of fiscal 2023, down from 1.69 in the prior-year quarter. A falling power ratio does not bode well, as it suggests the company may struggle to meet its near-term debt obligations.
Also, Booz Allen has more outstanding long-term debt than cash. Cash and cash equivalents were $371 million at the end of fiscal 2023 third quarter compared to long-term debt of $2.8 billion.
Zacks rank and stocks to consider
Booz Allen currently carries a Zacks rank #3 (hold).
Some better-ranked stocks in the broader Zacks Business Services sector are Avis Budget Group, Inc. CAR And ICF International, Inc. ICFI.
Avis Budget currently carries a Zacks Rank #2 (Buy). CAR has a VGM Score of A. Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best investment opportunities. You can see the full list of today’s Zacks #1 Rank stocks can be found here.
CAR delivered a trailing four-quarter earnings surprise averaging 78%.
ICF International currently carries a #2 Zacks rank. ICFI revenue and profits in 2023 are expected to have increased by 10.4% and 3.6%, respectively, year-on-year.
ICF International delivered a trailing four-quarter earnings surprise averaging 9.2%.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
