Booz Allen Hamilton Holding Corporation (BAH) Hits Fresh High: Is There Still Room to Run?
Have you been paying attention to shares of Booz Allen Hamilton (BAH)? Shares have been on the move with the stock up 7% over the past month. The stock hit a new 52-week high of $113.79 in the previous session. Booz Allen Hamilton has gained 8.8% since the start of the year compared to the 11.3% move for the Zacks Business Services sector and the 13% return for the Zacks Government Services industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on May 26, 2023, Booz Allen reported EPS of $1.01 versus consensus estimate of $0.92 while it beat the consensus revenue estimate by 2.73%.
For the current fiscal year, Booz Allen is expected to post earnings of $4.93 per share on $10.03 billion in revenues. This represents an 8.11% change in EPS on an 8.28% change in revenues. For the next fiscal year, the company is expected to earn $5.44 per share on $10.6 billion in revenues. This represents a year-over-year change of 10.41% and 5.75%, respectively.
Valuation Metrics
Booz Allen may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Booz Allen has a Value Score of B. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 23.1X current fiscal year EPS estimates, which is a premium to the peer industry average of 19.7X. On a trailing cash flow basis, the stock currently trades at 19.4X versus its peer group's average of 14.1X. Additionally, the stock has a PEG ratio of 2.27. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Booz Allen currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Booz Allen meets the list of requirements. Thus, it seems as though Booz Allen shares could have a bit more room to run in the near term.
How Does BAH Stack Up to the Competition?
Shares of BAH have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Maximus, Inc. (MMS). MMS has a Zacks Rank of # 1 (Strong Buy) and a Value Score of B, a Growth Score of B, and a Momentum Score of D.
Earnings were strong last quarter. Maximus, Inc. beat our consensus estimate by 2.56%, and for the current fiscal year, MMS is expected to post earnings of $4.42 per share on revenue of $4.99 billion.
Shares of Maximus, Inc. have gained 1.6% over the past month, and currently trade at a forward P/E of 19.69X and a P/CF of 13.15X.
The Government Services industry is in the top 2% of all the industries we have in our universe, so it looks like there are some nice tailwinds for BAH and MMS, even beyond their own solid fundamental situation.
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