Amentum: Valuation Re-Rating Will Likely Depend On Meaningful Margin Improvement

Summary

• Amentum which only became a listed entity in September last year, has underperformed its aerospace and defense peers quite significantly since listing.
• Despite the underperformance, we appreciate the revenue visibility and barriers to entry associated with a business of this ilk.
• The current EV/EBITDA valuation gap between Amentum and peers such as Leidos and Booz Allen Hamilton is justifiable given the variance in EBITDA margins.
• Amentum is also highly geared, although it looks set to turn more attractive on the FCF yield front.
• After establishing a bottom in April, the stock trended higher while also benefiting from a moving average crossover, but is now not too far from hitting potential resistance.

AndreyPopov

A Stable Business, Oriented Toward Top-Tier Government Clients

Amentum Holdings, Inc. (NYSE:AMTM), is a Virigina-based business that provides a wide range of differentiated technological, engineering and support solutions to the US, allied government agencies and large commercial enterprises (it has a presence

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.