Computer stock in a base as sales growth accelerates

Monday’s IBD 50 Stocks to Watch pick is one of the top defense computing stocks in a flat base close to a buy point. Booz Allen Hamilton (BAH) is the No. 1 in its sector and has reached a new high on its relative strength line.


McLean-Va.-based Booz Allen Hamilton specializes in data analytics, cybersecurity, digital solutions, engineering and consulting. The company provides services to the defense, homeland security, civil government, space, healthcare and commercial services industries. Defense customers include all four branches of the US military.

On Monday, the company announced its High Energy Laser Weapon System (HELworks). The system consists of three products:

1) The High Energy Laser Mission Equipment Pack (HEL MEP) is a weapon system for use in Stryker armored vehicles.

2) The Modular Compact High Energy Laser (MCHEL) is designed for ground engagements.

3) LightEngine is a fully integrated subsystem consisting of power, cooling, lasers and an integrated enclosure. Its capability has minimal platform impact and can be integrated with third-party components.

Computer stock in a base approaching new highs

The stock is in a flat base near a buy point of 99.41 on the MarketSmith chart. The relative strength line has reached a new high, as indicated by the blue dot on the MarketSmith chart. Stocks broke above the 50-day moving average a week ago in heavy volume, another positive sign. Stocks are 3% below the buy point.

Shares fell 0.7% in light volume on Monday afternoon.

The leading group progresses

BAH ranks first in the Business Services-Consulting industry group. The group is ranked 23rd out of 197 IBD groups, a slight improvement from 24th place a week ago and 49th place four weeks ago.

Booz Allen has a high composite rating of 96 and an EPS rating of 87. Declining earnings over the past four quarters have hurt the EPS rating. Still, the stock holds a relative strength rating of 92, meaning it has outperformed 92% of IBD stocks over the past 12 months.

Earnings report beats on both fronts

Booz Allen beat its first-quarter 2023 EPS and sales, released July 29.

“We are delighted to enter the financial year and our three-year investment thesis period with strong performances in line with our expectations. In a constantly dynamic environment, we remain focused on creating strategic momentum through operational excellence, delivering critical missions and investing in our exceptional workforce as we drive the digital future together,” said Horacio Rozanski, President and CEO.

Management reiterated its forecast for revenue growth of 5% to 9% for fiscal 2023, which ends in March.

Quarterly EPS has been erratic for the past six quarters, although improving. EPS for the quarter ended June rose to $1.13, up 6% from the prior year period and 86 cents in the March period.

Analysts expect annual EPS growth of 4% in fiscal 2023 and growth of 11% in fiscal 2024. Booz Allen Hamilton has a three-year EPS growth rate of 16%, according to the IBD Stock Check.

Take our anonymous survey and tell us what you like (and dislike) about your online broker
Ten participants will win a $50 Amazon gift card

The company’s quarterly sales growth accelerated from 4% in the September 2021 quarter to 7%, 13% and 13% again in subsequent quarters.

Booz Allen Hamilton has a return on equity of 54%, a measure of financial efficiency. The CAN SLIM investment strategy looks for companies with a minimum ROE of 17%, with the best performing growth stocks often posting 25% to 50%.

IT stock pays an annualized dividend yield of 1.8% to shareholders.

Institutions give mixed signals

Mutual funds hold 54% of the shares, with 1,139 holding the IT stock in September, down from 1,160 in June. The CAN SLIM method seeks increased institutional sponsorship.

Stifel raised its price target from 102 to 105, maintaining its buy rating on the IT stock on September 13.


What is CAN SLIM? If you want to find winning stocks, you better know

IBD Live: learn and analyze growth stocks with the pros

Looking for the next big winners in the stock market? Start with these 3 steps

Want more information on IBD? Subscribe to our investing podcast

Comments are closed.