Leidos Holdings (LDOS) has secured a series of large U.S. government contracts across IT modernization, hypersonic weapons, cruise munitions and managed health services, a cluster of awards that is drawing fresh attention to the stock.

Despite the steady flow of new defense and IT awards, Leidos Holdings’ share price is down about 14% over the past month and roughly 31% year to date. However, the 3 year total shareholder return of about 62% and 5 year total shareholder return of about 31% show a very different, longer term picture. This suggests recent weakness is more about shifting risk appetite than a sudden change in how the company’s contract wins are viewed.

If these contract wins have you rethinking where growth could come from next, it may be a good time to scan for other defense and infrastructure contractors through our power grid and critical infrastructure stock ideas in the 35 power grid technology and infrastructure stocks.

So with Leidos trading well below some intrinsic value estimates despite fresh multi billion dollar contracts in IT, hypersonics and munitions, is the recent share price slide a potential entry point, or is the market already pricing in future growth?

Most Popular Narrative: 36.7% Undervalued

At a last close of $126.01 versus a narrative fair value of $199.21, the current Leidos price sits well below what this widely followed storyline suggests, and the contract momentum and mix shift behind that view are where things get interesting.

Accelerating customer demand for digital modernization, AI-powered solutions, and autonomous systems in defense, healthcare, and intelligence plays to Leidos' strengths and is leading to higher-quality, higher-margin contracts that improve net margins, as these capabilities command premium pricing and are in areas of secular growth. Leidos' continued integration of advanced ai/automation within internal operations and customer offerings is yielding substantial sustained improvement in efficiency (lower indirect costs, faster product delivery), which is expected to support durable margin expansion and enhanced earnings.

Curious what kind of revenue path, margin profile and future earnings multiple are baked into that fair value, and how recurring contracts shape the outcome? The full narrative lays out the growth rate assumptions, the profit margin tweaks and the earnings multiple the story leans on for 2029. It also shows how government program funding and AI heavy projects feed into those projections, and what that implies for the gap between today’s price and the model value.

Result: Fair Value of $199.21 (UNDERVALUED)

However, this depends on U.S. federal funding and acquisition execution continuing without interruption, since shifts in spending priorities or tougher integrations could quickly challenge that optimism.

Next Steps

With sentiment clearly split between contract driven optimism and recent share price weakness, it makes sense to look under the hood yourself and move quickly to frame your own view by weighing the 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.