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About Booz Allen Hamilton
No, ladies and gentlemen, I am not analyzing a law firm today.
Although the name of this company may resemble that of a white-collar law firm in Washington D.C., the D.C. aspect is more on target but instead of working on staying completely on target with the law, Booz Allen Hamilton is more so focused on staying within the confines of the law but is in the primary business of helping its clients stay on target themselves.
It’s like poetry, isn’t it?
Headquartered near where else but Washington D.C., specifically in McLean, Virginia, Booz Allen Hamilton is a famed defense consulting company, acting as a trusted advisor for United States government and military branches such as the U.S. Army, the Department of Defense (DOD), Homeland Security, the Securities and Exchange Commission (SEC) and while it is not explicitly mentioned, it more than likely also serves other branches of the U.S. government such as intelligence agencies like the Central Intelligence Agency (CIA) and the National Security Agency, or the NSA.
Deriving the vast majority of its revenues from many of the prominent and even not-so-prominent branches of the United States government, Booz Allen Hamilton does a lot of different things and serves a lot of different mission critical roles in assisting said branches as a consultant.
A few primary examples of what Booz Allen Hamilton does for said entities include general consulting along with a host of cybersecurity services, extensive analytics capabilities along with a broad array of engineering solutions that its clients can all use in order to both protect the United States and enforce national security but also simultaneously offer its clients a Matryoshka doll of related solutions that it can tack on and use to easily upsell.
If you know me, you also know that I enjoy companies that are hyper focused, and Booz Allen Hamilton evidently fits that mold exceedingly well, as while it does go up against some fairly stiff global consulting competition, going up against generalists such as McKinsey & Company, Boston Consulting Group, Leidos, Deloitte, Accenture and many, many others, Booz Allen Hamilton has carved out its niche in the defense category.
Another net positive right off the bat with respect to this company is that I have a fair amount of reason to assume that this company is pretty recession resistant, since a great deal of its annual revenues come from the government, or better yet in more cases than one, the taxpayer, perhaps, along with the fact that both national security nor geopolitical unrest and turmoil don’t operate on the same time zone of the economy. In other words, even if the economy isn’t in the best shape and consumers are cutting back on spending across the board, so long as there are threats to this nation and instability in and around this country and a spendy United States government, Booz Allen Hamilton is seemingly well insulated from greater overall economic disruptions that many others simply are not.
And lastly, regarding the threats and instability, boy do I imagine that Booz Allen Hamilton has been hard at work these last few years, and even today for that matter.
These are some of my initial personal thoughts on Booz Allen Hamilton but you likely didn’t click on this stock analysis article to just read those, so allow me to formally introduce you to this company in the vein of its financials.
Booz Allen Hamilton’s stock financials
Trading at a current share price of $156.29 with a correlated market capitalization of $20.26 billion and a price-to-earnings (P/E) ratio of 34.01 as well as paying its investors an annual dividend of $2.04, Booz Allen Hamilton’s stock (NYSE: BAH) seems a bit richly valued at the moment given the state of its price-to-earnings ratio and the generally held investing principle that if a stock is trading at a price-to-earnings multiple that is greater than 20, it is considered to be overvalued in relation to its true, intrinsic value, which does make some sense given the company’s excellent share price performance over the last twelve months.
This rise in share price can likely be dominantly attributed to both heightened geopolitical tensions but also the continued AI wave, as one would be wise to remember that a large segment of this company’s business lies within information technology (IT) and analytics services.
Moving right along to the condition of the company’s balance sheet, Booz Allen Hamilton’s executive team is at the helm of approximately $6.5 billion in terms of total assets as well as $5.5 billion in terms of total liabilities, which, while the company’s liabilities seem a bit elevated, I am not all that deterred being that this company has to constantly be reinvesting in the latest and newest technologies for the clients it serves and with that, also has to consistently invest in the nation’s top talent, which can cost a pretty penny. I will also briefly mention that it is still technically total asset-heavy, and this is yet another reason I wouldn’t lose too much sleep at night over the company’s balance sheet. Also, when you do a little more digging you’ll find that the company’s management team has a fine track record of keeping a sunny-side-up balance sheet.
Regarding the company’s income statement, Booz Allen Hamilton’s annual revenue figures during and between 2020 and early 2024 have been sequentially growing at a nice pace, basing out at about $7.4 billion in 2020 and rising each and every subsequent year to its latest reported figure of $10.6 billion as reported in 2024, which tracks to me since demand for Booz Allen Hamilton’s services have naturally been high and for better or worse, I don’t see many scenarios in which the company’s services aren’t going to be needed in the months and years to come given the current landscape and state of affairs.
Regardless of reason(s), this is solid revenue growth and a likable trend.
Onto the company’s cash flow statement, Booz Allen Hamilton’s total cash from operations over the course of the same 2020-2024 timeframe have been dribbling down in the last handful of years, from a relative recent high of $737 million, as reported in 2022 to its most recently reported figure, which just so happens to be a relative low of $259 million. Evidently, context does matter being that there is actually a good deal of explanation pertaining to Booz Allen Hamilton’s decline in cash flows, as the defense consulting firm in question has made a few notable multi-hundred-million-dollar acquisitions in recent history, two relatively recent examples being the company’s purchase of EverWatch and Liberty IT Solutions, not to mention the fact that it has recently shelled out nearly $380 million in a legal settlement in which the company was subjected to this massive fine due to allegations of it violating the False Claims Act.
Hopefully Booz Allen Hamilton doesn’t make a habit out of entangling itself in such lawsuits, but I take a bit of comfort in knowing that this was a (still sizable) one-time expense.
Booz Allen Hamilton’s stock fundamentals
Specifically on Booz Allen Hamilton’s profitability, the company’s net profit margin (as shown on Charles Schwab’s platform) stands at 5.68%, which is most certainly low in its own right, however, yet another ounce of confidence is to be considered by the fact that its net profit margin is better than some of its most direct competitors. For example, competitors such as publicly traded Leidos and Jacobs Solutions maintain (not far from, but still) lower net profit margins of 2.08% and 4.12%, respectively.
Once again, it pays to hyper specialize.
Should you buy Booz Allen Hamilton stock?
This company is specialized, on trend with the current and (likely) future state of affairs, it has already integrated AI into its business and has also already developed a fantastic track record of utilizing and leading in this realm, and while its shares are technically trading a notable premium given its recent rise in share price, it still doesn’t make sense for me to give this company’s stock a “sell” rating. Primarily, Booz Allen Hamilton’s balance sheet is in shape for growth, its revenues have indeed been growing and although its cash flows have had more temporary downs than ups, this is a quality company with a lot of prevailing tailwinds, and therefore, I deem it most appropriate to offer this company’s stock (NYSE: BAH) a “hold” rating.
Real talk, if this company’s stock wasn’t trading at this elevated of a price-to-earnings multiple, it would be “buy” city for me.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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