Amentum Holdings, Inc. (NYSE:AMTM) is one of the 16 stocks Jim Cramer recently discussed. Cramer was bullish on the company as he highlighted its various important divisions and said:
“Now, when Amentum reported its latest quarter in early May, the results were good, better than expected revenues, a healthy earnings beat, management reaffirmed the full year earnings and cash flow guidance. Not bad. Sounds good. Then how come the stock dropped 4.5% the next day? Well, it seems that the market wasn’t overly impressed with Amentum’s growth story. While the company beat estimates, [it] still only posted 1% revenue growth year over year, and the earnings were just up 4%. That’s not good enough…
Amentum’s laid out a long-term growth plan calling for 4 to 6% compound annual revenue growth through 2028. They haven’t been able to gin up much excitement with that forecast. There’s a lot of companies that are growing much faster that aren’t that expensive, but I think they can hit these numbers… It’s important to remember that Amentum isn’t a newcomer to this space. It’s made up of a series of legacy businesses with deep roots in federal contracting, businesses with incumbent status, and longstanding agency relationships.
This familiarity is something incredibly important. When the government decide[s] where to allocate funds, they also have the scale to compete. Their $45 billion in backlog is one of the highest in the sector. This isn’t some fly-by-night outfit that’s going to have to fight tooth and nail for government contracts. This is a well-known commodity in a space where that really matters. … If there’s one thing that gives me pause about the stock, it seems that… and this is a… theme… for many of our homework names, that’s the ownership concentration.
More than 35% of Amentum is still owned by American Securities and Lindsay Goldberg, the company’s former private equity sponsors. This private overhang, it can be a real issue if these firms ever decide to unload their shares… The bottom line: While I’m worried about the private equity shareholders, I think this stock already has too much caution priced into it. Amentum sells for less than 10.5 times this year’s earnings estimates. That’s a pretty compelling valuation for a company with this kind of scale and long-term positioning. At the end of the day, I’d like to see some of the large shareholders, these private guys, reduce their stakes before jumping in. But Amentum’s definitely worth keeping on your radar.”
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Amentum (NYSE:AMTM) is a holding company whose subsidiaries deliver services in areas such as environmental sustainability, intelligence, analytics, engineering, research, and citizen systems.
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