KBR (KBR) has landed in the spotlight after the U.S. Transportation Command terminated the company’s role in the Global Household Goods Contract, a move that sent its shares sliding and triggered a class action investigation. Legal proceedings are now underway, with prominent firms examining whether shareholders were misled about the business impact. The contract’s abrupt loss and the resulting scrutiny are front and center for anyone weighing what comes next for KBR and its stock. This legal headwind caps off a difficult year for KBR. The stock has dropped 18% over the last twelve months and is down 14% so far this year, reflecting eroding investor confidence amid contract risk and litigation headlines. Even with healthy revenue and net income growth reported over the past year, recent momentum has been negative. Investor attention is now focused on the company’s ability to manage these new risks and chart a stable path forward. With a sharp slide in the share price and intensifying legal drama, the question remains whether KBR is now trading at a discount with upside potential or if the market is bracing for more turbulence ahead.

Most Popular Narrative: 18.2% Undervalued

According to the most widely followed narrative, KBR is currently trading well below its estimated fair value, with analysts projecting a meaningful upside if the company's earnings growth and margin expansion targets are achieved.

The passage of the U.S. Reconciliation Act is unlocking over $1 trillion in national security and defense spending through 2026. KBR is well-positioned to capture incremental funding due to its established positions in mission tech, advanced defense technologies, and intelligence contracts, supporting potential revenue and earnings growth.

Is KBR’s future priced for liftoff or caution? The narrative leans heavily on a fresh growth engine, one built on bold forecasts for earnings, sales momentum, and expanding margins. But how steep are these assumptions, and what could they mean for investors seeking a full swing in valuation? Dig deeper to discover the financial leaps that make this 18% undervaluation so compelling and decide for yourself which catalyst could reshape KBR’s story.

Result: Fair Value of $60.71 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, unexpected contract losses or continued government budget delays could derail KBR's turnaround. This would challenge the bullish outlook and highlight ongoing volatility.

Find out about the key risks to this KBR narrative.

Another View: Sizing Up the Value

Looking at things from a different angle, our DCF model also finds KBR undervalued. This method leans more on future cash flow forecasts and less on what analysts expect. Which lens will prove most accurate?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day ( check out KBR for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own KBR Narrative

If the consensus leaves you unconvinced or you want to dig deeper with your own perspective, you can shape your narrative in just a few minutes. Do it your way

A great starting point for your KBR research is our analysis highlighting 5 key rewards and 2 important warning signs that could impact your investment decision.

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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.