Can Recent Price Swings Reveal the True Value of SAIC in 2025?

• If you have ever found yourself wondering whether Science Applications International stock is truly undervalued or just misunderstood by the market, you are not alone.
• The stock has been on quite a rollercoaster lately, with a 2.0% dip in the past week, 9.4% over the last month, and a striking 38.8% over the past year.
• The recent price moves have caught the eye of investors, with broader uncertainty about the defense and government services sector making headlines. Discussions around federal contract trends and rising budget scrutiny have only added fuel to the debate about where Science Applications International's true value lies.
• Despite these ups and downs, the company currently boasts a valuation score of 6 out of 6, suggesting it checks every box for undervaluation. Next, we will dive deeper into the traditional ways investors value this company, but keep reading for an approach that might reveal even more than the standard metrics.

Find out why Science Applications International's -38.8% return over the last year is lagging behind its peers.

Approach 1: Science Applications International Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates what a company is truly worth by projecting its future cash flows and discounting them back to their value in today's dollars. For Science Applications International, the DCF uses a two-stage Free Cash Flow to Equity approach, extrapolating cash flows for the next decade.

Currently, the company reports Free Cash Flow of $449.7 million. Analyst consensus only extends a few years out, but those projections anticipate steady growth, with Free Cash Flow expected to reach around $595.2 million by fiscal 2028. Beyond that, further years are extrapolated based on recent trends and analyst expectations. Over the next ten years, discounted forecasts suggest Free Cash Flow will remain robust and climb gradually.

After running these numbers through the DCF model, the resulting estimated intrinsic value for Science Applications International is $210.88 per share. This valuation is 56.5% higher than the company’s current share price, indicating considerable undervaluation in the market.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Science Applications International is undervalued by 56.5%. Track this in your watchlist or portfolio, or discover 870 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Science Applications International.

Approach 2: Science Applications International Price vs Earnings (PE)

For consistently profitable companies like Science Applications International, the Price-to-Earnings (PE) ratio is a widely accepted way to gauge valuation. It tells investors how much they are paying for each dollar of the company’s earnings, making it a straightforward benchmark for mature, earnings-generating businesses.

However, what counts as a “fair” PE ratio is not static. Typically, higher growth prospects justify a higher PE, while greater business risks or weaker profitability push it lower. The sector you operate in and prevailing market sentiment also play a significant role.

Currently, Science Applications International trades at a PE ratio of 10.6x. This is markedly below the Professional Services industry average PE of 24.5x and even further beneath the average of its listed peers, which stands at 42.6x. At first glance, this might suggest the stock is cheap, but raw comparisons do not always tell the full story.

That is where Simply Wall St's "Fair Ratio" steps in. The Fair Ratio, calculated as 18.7x for Science Applications International, is a dynamic yardstick that factors in not just industry norms and peer groups but also the company’s own earnings growth, risk profile, profit margin, and market cap. This blend makes it a more tailored and holistic assessment of value than simple peer or industry averages.

Comparing the Fair Ratio of 18.7x to Science Applications International’s actual PE of 10.6x makes it clear that the stock is trading notably below what would be considered its fair value by these standards.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1396 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Science Applications International Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your own story behind a company's numbers, allowing you to frame your expectations for future revenue, earnings, and profit margins, and see how your perspective connects all the way through to a projected fair value. Narratives bridge the gap between a company's story and its financial forecasts, empowering you to go beyond standard metrics. On Simply Wall St's Community page, millions of investors use Narratives to shape their view, compare different outlooks, and instantly see how a company's current share price compares to their idea of Fair Value, making buy or sell decisions more relevant and personal.

What sets Narratives apart is that they update dynamically as new news, earnings releases, or other market events emerge, so your view always reflects the latest information. For example, some investors currently forecast that Science Applications International is worth up to $130 per share on a bullish narrative of digital transformation, while others, focused on industry headwinds and government budget uncertainty, see it as low as $91 per share. Narratives make it easy to sense-check these differing perspectives, refine your own, and invest with greater confidence, all in one place.

Do you think there's more to the story for Science Applications International? Head over to our Community to see what others are saying!

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.

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