Amentum (NYSE:AMTM) Secures Major Sellafield Contracts—Revisiting Its Valuation After UK Nuclear Win

Amentum Holdings (NYSE:AMTM) has secured major roles on a multi-billion-pound framework supporting decommissioning at the UK’s Sellafield nuclear site, which could result in up to $1.9 billion in contract value over 15 years.

See our latest analysis for Amentum Holdings.

The news has nudged sentiment around Amentum, but the momentum in its share price this year has been muted. While the recent Sellafield announcement highlights growth potential, the 1-year total shareholder return still stands at -26.4%. Short-term price movements reflect a degree of caution, though long-term investors will be watching to see if these new contracts translate into a real turnaround.

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With shares still down for the year and trading at a notable discount to analyst targets, the question for investors is whether Amentum is now an undervalued opportunity or if the market has already taken future growth prospects into account.

Price-to-Earnings of 102.5x: Is it justified?

Amentum Holdings is trading at a price-to-earnings ratio of 102.5, which stands in stark contrast to its recent close at $21.90. This multiple signals a significant premium compared to both industry peers and typical benchmarks for the professional services sector.

The price-to-earnings (P/E) ratio measures how much investors are willing to pay today for every dollar of future earnings. In fast-growing or highly profitable sectors, elevated P/E ratios can be justified if future profit expansion is expected to be remarkable, but they often signal overheating if not supported by consistent growth.

For Amentum, the market is currently pricing in a much higher growth expectation than what is seen across the U.S. Professional Services industry, which averages a P/E ratio of just 25.3. Furthermore, even when compared to its peer average of 23.8 or its own estimated fair price-to-earnings ratio of 43.8, Amentum’s multiple appears stretched. This suggests that either investors are overly optimistic about future profits, or there is a disconnect between growth expectations and reality.

Explore the SWS fair ratio for Amentum Holdings

Result: Price-to-Earnings of 102.5x (OVERVALUED)

However, ongoing muted share performance and a stretched valuation could signal persistent skepticism, particularly if contract wins do not drive meaningful earnings growth in the near term.

Find out about the key risks to this Amentum Holdings narrative.

Another View: Discounted Cash Flow Tells a Different Story

While Amentum's price-to-earnings ratio appears sky-high, our DCF model offers a different perspective. According to this discounted cash flow analysis, the shares are trading at a hefty 57.3% discount to their estimated fair value. This suggests the market may be overlooking future cash flow potential. Are these competing signals a sign of opportunity, or a warning to dig deeper?

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 Amentum Holdings 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 837 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 Amentum Holdings Narrative

If you prefer to dig into the numbers yourself or have a different perspective, you can easily craft your own take on Amentum Holdings in just a few minutes. Do it your way

A great starting point for your Amentum Holdings research is our analysis highlighting 4 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.

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