Defense and IT contractor Science Applications International Corporation (SAIC +16.59%) -- "SAIC" to its friends -- got really popular this morning, soaring 17.9% through 11:15 a.m. ET after crushing its fiscal Q3 2026 earnings report.
Analysts thought SAIC would earn only $2.15 per share (adjusted for one-time items) on $1.87 billion in sales. SAIC nailed the sales forecast, but turned those sales into profit of $2.58 per share.
Image source: Getty Images.
SAIC Q3 earnings
Not all the news was good. SAIC's sales fell 6% and operating profit decreased 20%, resulting in a 120-basis-point hit to operating margin. Bottom-line profits beat expectations, but still fell 1% (adjusted). Worse, net profit as calculated according to generally accepted accounting principles (GAAP) tumbled 21% to $1.69 per diluted share.
On the plus side, SAIC did grow free cash flow substantially. SAIC generated $135 million in real cash profit in the quarter, and that exceeded both reported operating income and net income.
NASDAQ: SAIC
Key Data Points
Is SAIC stock a buy?
In other positive news, SAIC reported a book-to-bill ratio of 1.2x, suggesting sales growth may accelerate going forward. Indeed, guidance suggests exactly this: Management raised sales guidance slightly, and now expects to record about $7.3 billion in sales this year. Adjusted profit will range from $9.80 to $10 per share, and free cash flow is still expected to exceed $550 million.
Now here's the best news of all: SAIC stock only costs about $4.9 billion. On $550 million in FCF, that gives the stock a price-to-free cash flow ratio of just 8.9. Even factoring debt into the picture, SAIC's not too expensive at an enterprise value to FCF ratio of 13.3x.
SAIC shouldn't have to grow very fast at all to justify that price and make SAIC stock a buy.
