LDOS, Leidos Holdings Inc.

Will it survive?

• Can it pay its interest? —
  Interest expense not tagged in the data
  What this means

  No usable interest-expense line was tagged in the filing data, but the balance sheet carries real net debt — so the interest burden here is unknown, not absent. Read the debt on the net-debt check below.

• How heavy is the debt, net of cash? $3.5B · 1.7× operating profit
  Modest net debt
  Cash $1.1B − debt $4.6B
  What this means

  Netting $1.1B of cash and short-term investments against $4.6B of debt leaves $3.5B owed, about 1.7× a year's operating profit (2.2× on the gross debt, before the cash). Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.

• How long is cash tied up? 50d
  Tight
  DSO 58 + DIO 9 − DPO 16 days
  What this means

  Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.

Is it a good business?

• Return on invested capital —
  Not enough data
  Industry peers: median 11%
  What this means

  The filing data didn't include the inputs for this check.

• Owner-earnings margin 7%
  Solid through the cycle
  10-yr median margin, range 4%–9%; latest $1.6B = operating cash $1.8B − maintenance capex $125M
  Industry peers: median 7%
  What this means

  What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 9% of revenue this year, a 7% median across 10 years. Treating stock comp as the real expense it is (less $95M of SBC) leaves $1.5B.

• Are earnings backed by cash? 1.21×
  Cash-backed
  Cash from ops $1.8B ÷ net income $1.4B
  What this means

  How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.

How is the cash used?

• Where do the earnings go? 38%
  Reinvests most of it
  Dividends + buybacks $611M ÷ Owner Earnings $1.6B — this fiscal year
  What this means

  Of $1.6B Owner Earnings, $611M (38%) went back to shareholders, $211M dividends, $400M buybacks. Net of $95M stock comp, the real buyback was about $305M. Returning most of it is the mark of a mature business with little left to reinvest at a high return; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does. This year's proportion is 38%; across the record (2016–2025) it is 47%, the capital-allocation section below.

• Investing or harvesting? 0.43×
  Harvesting
  Capex $125M ÷ depreciation & amortization as filed $290M
  What this means

  Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

The promise and the pay packet

• Is the buyback buying ownership, or mopping up? 0.6%
  The count is genuinely shrinking
  Stock compensation $95M (fiscal 2025), 0.6% of revenue · repurchases $400M · diluted shares -5.8% since 2022
  What this means

  Stock handed to employees is a real cost paid in the owner's own currency: it is charged against profit, but the shares it creates are permanent. Many companies repurchase stock at the same time, which looks like a return of capital and often is not — if the count barely moves, the cash merely cancelled the pay packet and bought the owner nothing. The three states worth telling apart are a count genuinely shrinking, a count standing still despite large repurchases, and a count rising because the issuance was never offset at all.

Graham’s defensive tests · 3 of 6 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

• Adequate size Pass
  Revenue ≥ $2B · $17.1B
  What this means

  Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.

• Strong liquidity Near
  Current ratio ≥ 2× · 1.70×
  What this means

  Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.

• Conservative debt Miss
  Debt ≤ working capital · $4.6B vs $2.0B WC
  What this means

  Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.

• Earnings stability Pass
  A profit every year (10-yr record) · no losses
  What this means

  Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.

• Dividend record Miss
  Uninterrupted dividends · 8 of 10 yrs
  What this means

  An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.

• Earnings growth Pass
  Earnings +33% over the record · +144%
  What this means

  At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.

• Moderate price —
  P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
  What this means

  Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $7.71/share (latest year $11.54), the averaged base the calculator's gate runs on. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2016–2025

Whether the record’s returns held, and what the capital reinvested earned.

• Profitable years 10 of 10
  What this means

  Never lost money over the record, the earnings stability Graham insisted on.

• Return on capital ≥ 15% 0 of 6 yrs
  What this means

  A moat shows up as a high return on invested capital that holds year after year, not one good vintage.

• Operating margin 6% → 9% (3-yr avg ends)

  In the filing’s words The margin widened even though the filing names price competition — the gain came from volume or cost, not pricing power. Read where.

  What this means

  Through the cycle the operating margin widened — about 6% early to 9% lately, median 8% — pricing power intact or improving.

• Reinvestment, incremental ROIC 24%
  What this means

  Every extra dollar the business reinvested came back at a high incremental return — the lens GBM read for a moat that reinvests rather than merely harvests. The record and the 10-K are where you check whether the rate holds.

• Owner earnings growth +14%/yr
  What this means

  Owner earnings grew about 14% a year over the record.

• Worst year 2023 · 4.0% op. margin
  What this means

  Stayed profitable even in its hardest year, the resilience that survives recessions.

• Share count +2.5%/yr
  What this means

  The share count is rising, dilution works against you on a per-share basis.

• Dividend record paid
  What this means

  Paid a dividend in 8 of the years on record.