Booz Allen Hamilton Holding Corp (BAH) stock intrinsic value fair value estimate & owner earnings analysis

Booz Allen Hamilton sells consulting, engineering, analytics, cyber and technology services almost entirely to the U.S. federal government (defense, intelligence and civil agencies). Revenue grew from about $5.8 billion (fiscal year ended March 2017) to $12.0 billion (March 2025), then fell 6% to $11.2 billion in fiscal 2026 as federal procurement and funding slowed, including the third-quarter government shutdown, and headcount was cut. Pre-tax income fell 29% to $862 million, and the first quarter of fiscal 2027 (June 2026) showed revenue down about 4% and net income down about 27% from a year earlier. Total backlog rose 3% to $38.2 billion, but only $4.3 billion of it is funded and $23.7 billion is unexercised priced options. How we measured earnings: owner earnings are operating cash flow, with the swings in receivables, payables and taxes removed, less stock compensation ($69 million in fiscal 2026) and the maintenance portion of capital spending (about $90 million). On that basis owner earnings were roughly $685 million in fiscal 2024, $959 million in fiscal 2025 and $994 million in fiscal 2026. Fiscal 2023 is excluded from our baseline because a roughly $377 million Justice Department settlement was accrued (paid in fiscal 2024) and Section 174 tax capitalization produced a large cash-tax drag. Fiscal 2026 is flattered by an effective tax rate of only 1.3% (research credits and release of uncertain tax positions worth roughly $180 million), which we do not treat as recurring. We anchored on the median of fiscal 2022 and 2024-2026, about $6.35 per share, and then set the level at about $720 million (roughly $6.00 per share on 120 million shares), consistent with a run-rate after normal taxes. In fiscal 2026 owner earnings per share grew about 9% (helped by share buybacks); we credit no growth in any case, since revenue and profit are currently falling and nothing secured yet reverses that. Buybacks are not counted as value creation. Acquisition-related amortization is added back as a sunk cost; because we assume no growth and an eventual fade, wasting intangibles are not overstated. Base case (about $67 per share): $720 million a year held flat for 15 years, then fading linearly to zero over the following 10. The evidence for persistence is a franchise with a multi-decade record of winning and re-winning federal task orders, a backlog worth about 3.4 years of revenue and a cleared, specialised workforce; we give no credit for growth beyond that. Bear case (about $28): owner earnings settle near $480 million (a further one-third drop, in line with the current trend in pre-tax income and revenue and continued cuts to consulting spend), hold six years and fade to zero over eight; debt of about $3.9 billion, with $191 million of annual interest already paid out of cash flow, and the history of a government settlement make this a real risk. Bull case (about $89): owner earnings recover to $850 million (between the fiscal 2024 and fiscal 2025-26 levels) as funded backlog additions (about $11.1 billion in fiscal 2026) convert to revenue, held 20 years then fading over 10. What would make this estimate wrong: a lasting shrinkage of federal consulting budgets or loss of major recompetes would push toward the bear case; conversely a return to fiscal 2025 profitability with normal taxes would exceed our base. We could not fully reconcile how much of the fiscal 2026 cash flow reflects one-time tax items versus lasting lower cash taxes, so we took the conservative normalisation.