At today's price, Leidos' stock is pricing in roughly flat-to-slightly-negative free-cash-flow growth for the next ten years, at a 9% discount rate. Over the past five years, the company's actual free-cash-flow growth averaged 15.1% a year.
At its current price, LDOS implies roughly -1% to +1% annual free-cash-flow growth for the next 10 years, discounted at 9%.
Leidos's actual 5-year free-cash-flow growth has averaged 15.1% a year; revenue grew 5.7% a year over the same period.
Required growth vs. historical growth
Required growth from the reverse DCF below. Historical CAGRs calculated directly from 10-K filings FY2021–FY2025.
Sensitivity: what if the discount rate moves?
| WACC | Required annual growth |
|---|---|
| 8% | -2.99% |
| 9% (base case) | -0.95% |
| 10% | 0.91% |
| 12% | 4.29% |
Across the entire 8–12% discount-rate range, the required growth stays between -3.0% and +4.3% — always well below both the 5.7% revenue CAGR and the 15.1% FCF CAGR Leidos has actually delivered.
What would move this number
- Using a 3-year average FCF ($1,297M) instead of the single FY2025 figure ($1,625M) raises the required growth rate from -0.95% to +2.07% at a 9% discount rate — still well under either historical growth figure.
- Assuming a more conservative 12% discount rate pushes the required rate up to 4.29%, closer to the 5.7% revenue CAGR — at which point the read shifts from "well below trend" toward "roughly in line with trend."
- Changing the assumed net-debt figure would shift the target enterprise value and, with it, the required growth rate directly.
Show your work
Five inputs, sources, model assumptions, and the calculation
- Share price$129.55 — stockanalysis.com, Sept. 10, 2026 close
- Market cap$16,260M — stockanalysis.com, Sept. 10, 2026
- Net debt$3,540M — total debt $4,648M − cash $1,108M, 10-K FY2025, p.59
- Free cash flow (base)$1,625M — operating cash flow $1,750M − capex $125M, 10-K FY2025, p.63
- Discount rate (WACC)9% base case (8% / 10% / 12% tested); large stable defense/gov-IT services company classification
FCF normalization check: the last 3 years' FCF were $980M (FY2023), $1,286M (FY2024), and $1,625M (FY2025) — a 3-year average of $1,297M. FY2025's actual figure is +25.3% above that average, inside our ±40% threshold and with no identified one-time items, so no normalization was applied to the base case.
Model: free cash flow is assumed to grow at a constant annual rate g for 10 years, then at a 2.5% terminal rate thereafter. Target enterprise value = market cap + net debt = $16,260M + $3,540M = $19,800M. We solve by bisection for the value of g that makes the present value of those cash flows equal that target.
| Component | Value |
|---|---|
| Market cap | $16,260M |
| Net debt | $3,540M |
| Target enterprise value | $19,800M |
EV = Σ(t=1..10) FCF₀×(1+g)ᵗ/(1+WACC)ᵗ + [FCF₀×(1+g)¹⁰×1.025/(WACC−0.025)]/(1+WACC)¹⁰, solved for g by bisection (200 iterations). Revenue CAGR = (FY2025 revenue ÷ FY2021 revenue)^(1/4) − 1 ≈ 5.74%. FCF CAGR = ($1,625M ÷ FY2021 FCF)^(1/4) − 1 ≈ 15.07%.
The fine print
- Change the discount rate, the projection window, the terminal growth rate, or how FCF is normalized, and the answer moves.
- A reverse DCF shows what the market currently expects — it does not say what the stock is "worth."
- A low implied growth rate can reflect real risk perception (federal budget exposure, the DOJ investigation, integration risk from the Entrust deal) rather than simple undervaluation — that's a business question, not a math one.
- Any investment decision, and its outcome, is your own responsibility.
How this number is built, and how banks, REITs, and negative cash flow are handled: see our methodology.
Frequently asked questions
What growth rate does LDOS's stock price assume?
At its current price, Leidos is pricing in roughly -1% to +1% annual free-cash-flow growth for the next ten years, discounted at a 9% rate.
How does that compare to Leidos' actual growth?
Leidos' actual free-cash-flow growth averaged 15.1% a year over the past five years, and revenue grew 5.7% a year — both well above the roughly flat growth the current price requires.
What share price was used for this analysis?
This analysis used $129.55, Leidos' closing price on Sept. 10, 2026.