SAIC

SAIC is a high-quality but slow-growing defense IT integrator trading at undemanding multiples. FY2026 produced $7.26B in revenue (down 2.9% YoY) and $358M in net income (essentially flat), with operating income down 7.5% to $521M. The EPS gain to $7.70 (+7.4%) is almost entirely manufactured by buybacks — share count fell 9.0% and the company returned $445M via repurchases plus $70M in dividends. Operating cash flow of $609M (+23.3%) on just $32M of capex is the real story: this is a capital-light services business converting earnings to cash and shoveling it back to shareholders. ROE of 23.9% is strong, though it's leveraged — long-term debt jumped 29.4% to $2.47B against $1.50B of equity.

The filing makes the bear case explicit. Management discloses that '98% of our total revenues during each of the last three fiscal years' came from the US government, and warns directly that 'current U.S. government spending levels for defense-related and other programs may not be sustained through government fiscal year 2026.' The newly cited DoW 'Acquisition Transformation Strategy' may 'restructure contract requirements... shift acquisition strategy toward longer-term contract structures, and require increased upfront investment on R&D-based concepts and solutions' — a meaningful operating risk for a company that spends just $13M on R&D. Continuing-resolution risk and the explicit DHS funding-impasse callout through 9/30/2026 add near-term contract-award timing risk.