Over the past six months, SAIC’s stock price fell to $94.65. Shareholders have lost 5.8% of their capital, which is disappointing considering the S&P 500 has climbed by 5.8%. This might have investors contemplating their next move.
Is now the time to buy SAIC, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think SAIC Will Underperform?
Even though the stock has become cheaper, we're sitting this one out for now. Here are two reasons there are better opportunities than SAIC and a stock we'd rather own.
1. Long-Term Revenue Growth Flatter Than a Pancake
A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, SAIC struggled to consistently increase demand as its $7.26 billion of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a sign of poor business quality.
2. Revenue Projections Show Stormy Skies Ahead
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 SAIC’s revenue to drop by 1.9%, close to its flat result for the past five years. This projection is underwhelming and indicates its newer products and services will not lead to better top-line performance yet.
Final Judgment
We see the value of companies helping their customers, but in the case of SAIC, we’re out. After the recent drawdown, the stock trades at 9.9× forward P/E (or $94.65 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now. We’d suggest looking at the Amazon and PayPal of Latin America.
Stocks We Like More Than SAIC
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