Booz Allen Stock Looks Undervalued as Earnings Loom

Markets hate uncertainty, and so do companies that rely heavily on the government for a good deal of their business. Booz Allen Hamilton Holding Corp (NYSE:). generates approximately 97% of its revenue from the federal government, which explains the BAH stock’s total return of over 500% in the last 10 years.

However, it’s also a key reason why BAH stock is down more than 16% in the last 12 months.

Companies like Booz Allen Hamilton are in the crosshairs as Congressional leaders look for any area to find budget cuts.

On the other hand, the company holds a unique leadership position among business services stocks, including being the federal government’s leading artificial intelligence (AI) provider.

That gives the company a distinct moat that is likely to build a high floor for its revenue and earnings. It’s also why the stock has been up more than 14% since it reported earnings on January 31, 2025.

That’s the backdrop for the company’s fourth quarter earnings report for fiscal year 2025, which will take place before the market opens on May 23.

Here are three reasons investors may want to take a closer look at BAH stock.

The Unknown Is Worse Than the Known

Booz Allen Hamilton is a consulting firm with the Federal Government as one of its largest clients. Over the company’s long history, that’s been a tailwind to its top and bottom lines.

However, the Trump administration has leaned hard on several consulting firms to deliver deep price concessions or face potential consequences.

In April, the Wall Street Journal reported that a group of consulting firms, including Booz Allen Hamilton, Marsh and McLennan Cos. Inc., IBM (NYSE:), and Accenture plc (NYSE:), proposed up to $20 billion in savings to federal contracts. This would be in the form of terminating existing contracts or reducing the scope of work in existing contracts.

However, the good news is that those cuts are likely already reflected in the omnibus legislation making its way through Congress. That means that while the upcoming earnings report will likely reflect some weakness, investors will likely find the company’s forward guidance appealing.

Strong Earnings Growth Showcases Efficiency

Revenue growth is important, but earnings growth is traditionally a better predictor of stock price growth. Booz Allen Hamilton’s earnings growth is also a strength. Over the past five years, the company has increased its earnings per share (EPS) at a compounded annual growth rate (CAGR) of 14.5%, while revenue has increased at a CAGR of 10.1%.

The takeaway for investors is that as the company’s revenue is expanding, it’s becoming more profitable. That’s a trend that’s likely to continue, particularly because of the company’s 50% operating margin.

BAH Stock Is Undervalued

Many companies may appear overvalued compared to a broad market benchmark like the S&P 500. However, it’s important to look at the stock’s valuation. As of May 22, 2025, BAH stock had a price-to-earnings (P/E) ratio of around 19x. That’s well below the sector average of around 29x for defense and aerospace stocks.

Adding to the undervalued story, Booz Allen Hamilton stock is trading at a discount to its own historical P/E ratios. Making this even more enticing is that this undervaluation is not just based on the last 12 months, but over the last five years.

The stock’s recent performance may reflect some of that value proposition. Heading into earnings, the Relative Strength Indicator is flashing an overbought signal. But BAH stock is also closing in on its 200-day simple moving average at $137.70. A strong earnings report could push it past that level and would likely cause analysts to rethink current price targets.

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