Intrinsic Value Science Applications International Corporation (0V9N.L)

• Previous Close: £101.37
• Intrinsic Value: £44.63
• Upside potential: -56%

Stock Valuation Context

Business Model And Market Position

Science Applications International Corporation (SAIC) operates as a leading provider of technical, engineering, and enterprise IT services, primarily serving U.S. government agencies, including the Department of Defense, NASA, and intelligence communities. The company specializes in IT modernization, cloud migration, and managed services, delivering end-to-end solutions that encompass design, deployment, and security of critical infrastructure. SAIC’s deep expertise in defense and federal IT systems positions it as a trusted partner in high-stakes, long-term government contracts. Its revenue model is anchored in multi-year service agreements, ensuring stable cash flows while leveraging its technical acumen to address complex national security and civilian agency needs. The company’s market position is reinforced by its decades-long relationships with key federal stakeholders, differentiating it from competitors through domain-specific knowledge and scalable IT-as-a-service offerings. SAIC’s focus on modernization and cybersecurity aligns with growing federal IT budgets, enhancing its competitive edge in a sector where reliability and compliance are paramount.

Revenue Profitability And Efficiency

SAIC reported revenue of $7.48 billion, with net income of $362 million, reflecting a net margin of approximately 4.8%. The company generated $494 million in operating cash flow, demonstrating efficient conversion of revenue into cash. Capital expenditures were modest at $36 million, indicating a capital-light model focused on service delivery rather than heavy asset investments. Diluted EPS stood at $7.17, underscoring consistent profitability.

Earnings Power And Capital Efficiency

SAIC’s earnings power is supported by its high-margin IT services and long-term government contracts, which provide revenue visibility. The company’s capital efficiency is evident in its ability to generate substantial operating cash flow relative to its capital expenditures. With a diluted EPS of $7.17, SAIC delivers solid returns to shareholders while maintaining operational flexibility.

Balance Sheet And Financial Health

SAIC holds $59 million in cash and equivalents against total debt of $2.41 billion, reflecting a leveraged but manageable balance sheet. The company’s debt levels are typical for firms in the government services sector, where long-term contracts provide predictable cash flows to service obligations. Its financial health is further supported by strong operating cash generation.

Growth Trends And Dividend Policy

SAIC’s growth is tied to federal IT spending trends, with opportunities in cybersecurity and cloud modernization driving demand. The company pays a dividend of $1.48 per share, signaling a commitment to returning capital to shareholders. Its growth strategy focuses on expanding its service portfolio and securing new government contracts, balancing reinvestment with shareholder returns.

Valuation And Market Expectations

With a market cap of $5.59 billion and a beta of 0.545, SAIC is viewed as a relatively stable investment within the technology sector. The company’s valuation reflects its steady government-backed revenue streams and moderate growth prospects, aligning with investor expectations for defensive, cash-generative businesses.

Strategic Advantages And Outlook

SAIC’s strategic advantages include its entrenched position in federal IT services and expertise in high-compliance sectors. The outlook remains positive, supported by sustained government IT budgets and the company’s ability to adapt to evolving technological demands. Its focus on modernization and cybersecurity positions it well for long-term growth in a competitive but stable market.

Sources

Company filings, market data