Is Leidos Holdings, Inc. (LDOS) A Good Stock To Buy Now?

Is LDOS a good stock to buy? We came across a bullish thesis on Leidos Holdings, Inc. on r/ValueInvesting by iloveaccounting64. In this article, we will summarize the bulls’ thesis on LDOS. Leidos Holdings, Inc.’s share was trading at $123.52 as of June 9^th. LDOS’s trailing and forward P/E were 11.30 and 10.11 respectively according to Yahoo Finance.

Leidos Holdings, Inc., together with its subsidiaries, provides services and solutions for government and commercial customers in the United States and internationally. LDOS is emerging as a compelling opportunity within the defense and government technology sector as geopolitical tensions continue to rise globally. Increasing instability among major powers such as the U.S., China, and Russia, alongside escalating regional conflicts, is expected to drive sustained growth in defense spending, particularly in technology-enabled defense infrastructure where LDOS maintains a strong competitive position.

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The company operates with solid fundamentals, supported by a healthy balance sheet, shrinking net debt, stable working capital, and disciplined capital allocation. LDOS continues to generate consistent profitability with mid-single-digit revenue growth, double-digit net income expansion, improving margins, and robust free cash flow generation. The business currently generates approximately $17 billion in annual revenue while producing nearly $1.8 billion in free cash flow, yet trades at a market valuation near $16 billion, implying an attractive valuation of roughly 11x earnings and free cash flow.

This translates to an 8.5% free cash flow yield, significantly above prevailing Treasury yields, highlighting the market’s undervaluation of the company’s durable cash-generating ability. Management has also demonstrated shareholder-friendly capital allocation through a balanced combination of dividends and aggressive share repurchases, with total capital returned to shareholders increasing substantially over recent years.

While near-term free cash flow is pressured by elevated capital expenditures tied to its long-term 2030 growth initiative, LDOS retains a massive $48 billion backlog and a resilient core business. The current weakness in the defense sector presents an attractive long-term entry point for investors seeking exposure to defense modernization and government technology spending growth.

Previously, we covered a bullish thesis on Palantir Technologies Inc. by Deep Value Returns in May 2025, which highlighted the company’s AI leadership, rapid revenue growth, and premium valuation supported by long-term market dominance in data analytics. PLTR’s stock price has appreciated by approximately 21.32% since our coverage. iloveaccounting64 shares a similar view but emphasizes Leidos Holdings, Inc.’s undervalued cash flow profile, defense spending tailwinds, and disciplined shareholder returns.

Leidos Holdings, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 44 hedge fund portfolios held LDOS at the end of the first quarter which was 37 in the previous quarter. While we acknowledge the risk and potential of LDOS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LDOS and that has 10,000% upside potential, check out our report about this cheapest AI stock.

Disclosure: None.