Leidos’ (LDOS) booming defense business, along with its ability to benefit significantly from the federal government’s likely increased demand for cybersecurity services, makes LDOS stock attractive to value and conservative investors. Additionally, following an acquisition Leidos completed in January, the company is poised to benefit from increased spending by electric and gas utilities, and Leidos stock is trading at a low, attractive valuation.
While the Street is concerned about issues facing the company’s healthcare unit, Leidos’ positive attributes far outweigh this one negative point.
The Booming Defense Business and a Well-Positioned Cybersecurity Unit
The book-to-bill ratio of the firm’s defense unit came in at a very strong 2.2 in the second quarter. In other words, as Google AI explains, “Leidos received $2.20 in new orders for every dollar of defense work executed and billed.” So the unit is growing very quickly.
And in the year from August 2026 to August 2027, the pipeline of its defense tech business encompasses $12 billion, CEO Tom Bell estimated. Since analysts expect total 2027 revenue to come in at $19.15 billion, growth in its defense offerings should move the needle for the firm in 2027.
The company is already disclosing a wave of lucrative, impressive contracts with the Pentagon. For example, on September 22, Leidos received a contract extension worth up to $127 million from the Army. Under the agreement, Leidos will “continue providing airborne intelligence, surveillance, and reconnaissance capabilities to the … Army.”
More impressively, the company disclosed in August that it had obtained a $301 million deal “to provide continuous cyber defense operations for U.S. Army networks.” All indications are that Leidos is well-positioned to benefit from the Trump administration’s massive missile-defense initiative. The company reported in August that its sensors would be integrated by Sierra Space “into 18 missile warning and tracking satellites designed to detect and track hypersonic and advanced missile threats.”
Although Leidos doesn’t appear to break down its total revenue from cybersecurity, the company has won many large deals in the area, such as the $301 million contract to provide IT security for the Army, reported above, and multiple deals from the State Department, announced last May, which included a cybersecurity component.
DHI CEO Art Zeile reported in June that “the federal government has been aggressively building out its cybersecurity capabilities” amid “the increased use of AI in cyberattacks and the looming Anthropic Mythos model that is expected to make it even easier for hackers to find and exploit vulnerabilities,” DHI owns ClearanceJobs.
As we advance, Leidos should benefit meaningfully from the trend described by Zeile.
A Beneficiary of Higher Spending by Electric Utilities and a Low Valuation
In January, Leidos acquired ENTRUST Solutions Group, which specializes in energy infrastructure engineering, for about $2.4 billion. Leidos said it now generates about $1.2 billion in annual revenue from energy infrastructure engineering projects.
LDOS added that “Acquiring ENTRUST will broaden Leidos’ base of (gas and electric) utility clients and strengthen its ability to drive innovation across a broader, more diverse set of utility customers.”
According to Google AI, capital spending by such utilities is expected to climb 30% this year and reach $1.4 trillion between now and 2030. That total represents an increase of about 25% versus previous forecasts.
On the valuation front, Leidos is trading at an extremely low and attractive forward price-to-earnings ratio of 9.5 times.
Leidos Stock Can Rebound Despite the Issues of Its Healthcare Unit
The company’s healthcare unit is facing significant challenges, as the government reduced the fees Leidos can charge for medical exams and is seeking to phase out the firm’s DHA Genesis health record initiative with the military.
But analysts still expect the company’s revenue to rise 6.6% this year and 4.6% in 2027, and they may be meaningfully underestimating the impact of its positive catalysts.
Add in the stock’s low valuation, and Leidos looks like a very good choice for patient value investors and conservative investors.
