Leidos Holdings (LDOS) is back in focus after Q1 2026 results topped earnings and revenue estimates, management raised full year guidance, and the company closed its Entrust acquisition alongside several large US government contract wins.

Despite the stronger outlook and recent contract wins, the stock’s recent share price return has been weak, with a 30 day share price return showing a 17.38% decline and a year to date share price return showing a 28.46% decline, while the 3 year total shareholder return of 73.65% still reflects much stronger longer term performance.

If you want to see how other companies exposed to similar defense and infrastructure themes are trading, it could be worth scanning 36 power grid technology and infrastructure stocks

With Q1 guidance raised, fresh contract wins, and a long term total return still positive, Leidos now trades after a sharp pullback. Is this weakness pointing to an undervalued stock, or is the market already pricing in future growth?

Most Popular Narrative: 34.1% Undervalued

At a last close of $131.26 versus a narrative fair value of $199.21, the widely followed view frames Leidos as materially discounted, with that gap tied to specific assumptions around revenue, margins and future valuation multiples.

Leidos is positioned to benefit from increased, multi-year government funding focused on national security, defense modernization, border protection, and infrastructure, particularly through the One Big Beautiful Bill and related initiatives (e.g., FAA air traffic modernization, Golden Dome, maritime autonomy), which are expected to drive robust future revenue growth across core projects.

Want to see what sits behind that funding story and the near term pullback in the share price? The narrative leans on specific revenue growth, margin paths and an earnings multiple that has to shift meaningfully from where it is today. The full breakdown spells out exactly which levers need to work for that fair value to hold up.

Result: Fair Value of $199.21 (UNDERVALUED)

However, this bullish setup can crack if U.S. federal budgets tighten or large acquisitions underperform, which would put pressure on revenue visibility and the anticipated P/E re rating.

Next Steps

With a mix of optimism around growth and concern around potential risks, it helps to look at the full picture and move quickly to your own view using 5 key rewards and 1 important warning sign

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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.