Value
6.6/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 6.7 |
| P/S | 9.8 |
| EV/EBITDA | 4.6 |
| Fwd P/E | 8.4 |
| PEG | 6.6 |
| Analyst target | 4.0 |
- ▸Forward P/E: 13.9x
- ▸PEG: 1.10
HII · Why this verdict
Why Huntington Ingalls Industries, (HII) is rated HOLD
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictHOLD
Overall score5.9/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
Huntington Ingalls has delivered four consecutive earnings beats and holds roughly 13% upside to the analyst consensus target at a risk/reward of approximately 2.2-to-1 in your favor, but the business is almost entirely dependent on U.S. Navy contracts at below-average profitability margins, making the investment case contingent on sustained defense appropriations rather than competitive differentiation.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Quality metrics fall below average with weak operating margins and low returns on assets, indicating limited pricing power and thin profitability consistent with cost-plus government contracting rather than a value-creating franchise. Key risks | Operating margins improve materially over the next 12 months as productivity programs gain traction, moving toward mid-single-digit levels typical of defense contractors. | →Stable |
| CounterBelow-average margins in naval shipbuilding are structurally inherent to the cost-plus contracting model; consistent contract wins, dividend coverage, and backlog depth may matter more to long-term holders than margin improvement. | ||
The company has beaten consensus EPS estimates in each of the last four quarters, demonstrating consistent execution against expectations across a range of contract delivery milestones. Earnings | The beat streak extends through the next 2 earnings reports with positive EPS surprises, confirming sustainable execution. | ↑Improving |
| CounterThe magnitude of beats has declined quarter over quarter — from 12.5% in the oldest reported quarter to just 1.7% in the most recent — suggesting estimates have been progressively raised toward actual performance, leaving limited room for continued material upside. | ||
At roughly 13% below the analyst consensus price target with a risk/reward ratio of approximately 2.2-to-1 in your favor, the price geometry offers meaningful room for appreciation if the earnings track record is maintained. Price targets | Price appreciates toward the $337 analyst target within 12 months without deterioration in earnings estimates. | ↓Deteriorating |
| CounterThe favorable geometry is contingent on government budget stability; any sequestration or continuing resolution delaying naval appropriations would likely compress both earnings and the multiple simultaneously, collapsing the ratio. | ||
The U.S. Navy represents approximately 81% of revenues, a near-total dependence on a single government customer that makes financial results sensitive to shifts in one department's budget rather than broad market dynamics. Bear case | The company announces material new contract awards outside the existing Navy base, reducing Navy revenue concentration below 72% within 3 years. | →Stable |
| CounterThe deep Navy concentration may reflect a structurally entrenched position as one of only a handful of domestic shipyards capable of building and servicing nuclear naval vessels — a barrier to entry that makes the relationship durable rather than fragile. | ||
Quality metrics fall below average with weak operating margins and low returns on assets, indicating limited pricing power and thin profitability consistent with cost-plus government contracting rather than a value-creating franchise.
→StableKey risks
- Expectation
- Operating margins improve materially over the next 12 months as productivity programs gain traction, moving toward mid-single-digit levels typical of defense contractors.
CounterBelow-average margins in naval shipbuilding are structurally inherent to the cost-plus contracting model; consistent contract wins, dividend coverage, and backlog depth may matter more to long-term holders than margin improvement.
The company has beaten consensus EPS estimates in each of the last four quarters, demonstrating consistent execution against expectations across a range of contract delivery milestones.
↑ImprovingEarnings
- Expectation
- The beat streak extends through the next 2 earnings reports with positive EPS surprises, confirming sustainable execution.
CounterThe magnitude of beats has declined quarter over quarter — from 12.5% in the oldest reported quarter to just 1.7% in the most recent — suggesting estimates have been progressively raised toward actual performance, leaving limited room for continued material upside.
At roughly 13% below the analyst consensus price target with a risk/reward ratio of approximately 2.2-to-1 in your favor, the price geometry offers meaningful room for appreciation if the earnings track record is maintained.
↓DeterioratingPrice targets
- Expectation
- Price appreciates toward the $337 analyst target within 12 months without deterioration in earnings estimates.
CounterThe favorable geometry is contingent on government budget stability; any sequestration or continuing resolution delaying naval appropriations would likely compress both earnings and the multiple simultaneously, collapsing the ratio.
The U.S. Navy represents approximately 81% of revenues, a near-total dependence on a single government customer that makes financial results sensitive to shifts in one department's budget rather than broad market dynamics.
→StableBear case
- Expectation
- The company announces material new contract awards outside the existing Navy base, reducing Navy revenue concentration below 72% within 3 years.
CounterThe deep Navy concentration may reflect a structurally entrenched position as one of only a handful of domestic shipyards capable of building and servicing nuclear naval vessels — a barrier to entry that makes the relationship durable rather than fragile.
Per-dimension breakdown
Quality
4.0/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 4.1 |
| ROA | 2.7 |
| Gross margin | 0.0 |
| Op margin | 2.6 |
| Net margin | 2.4 |
| Current ratio | 4.6 |
| FCF quality | 7.2 |
| Moat | 6.1 |
| Piotroski F | 6.7 |
Growth
3.9/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 5.8 |
| EPS growth | 2.0 |
Momentum
8.3/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.5 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 7.2 |
| Volume | 10.0 |
| vol acceleration | 9.4 |
- ▸Volume accumulation (rising OBV)
- ▸Below 200-MA but MA still rising (+0.4%/30d) — pullback in uptrend, not confirmed weakness
- ▸Volume surge (2.7x avg) on up move
Sentiment
7.3/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 7.9 |
| Analyst rating | 7.0 |
| Price target | 7.0 |
- ▸LLM news sentiment: +0.57 (n=4)
Insider
7.3/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 10.0 |
| notable moves | 7.0 |
- ▸Insider selling (low materiality) — $1,118,534 (0.010% of mkt cap)
- ▸Institutions accumulating
Peer rank
5.8/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 9.4 |
| quality rank | 5.1 |
| growth rank | 3.6 |
- ▸Attractive P/E vs peers
Technical
1.8/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 0.0 |
| support resistance | 0.1 |
| 52w position | 4.0 |
| gap | 3.0 |
- ▸Extreme gap up (9.5%) - may pull back
Risk (lower is worse)
7.7/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 8.5 |
| days to cover | 8.7 |
| volatility | 3.2 |
| put call | 10.0 |
| implied vol | 6.3 |
| max pain risk | 7.0 |
| beta | 10.0 |
| debt equity | 7.6 |
- ▸Concentration risks: 3 HIGH (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 5.9 |
| dividend safety | 6.8 |
| news activity | 8.0 |
- ▸Perfect beat streak: 4Q
- ▸Earnings in 0 days
How the verdict was assembled
Engine trigger
Downgraded from BUY WAIT — price $319.90 has reached target $314.24. No upside to wait for.
Engine technical detail
verdict_path:
L3:NEWS_BLOCK|SANITY:WAIT+price>=TPPassed (6)
- MOMENTUM:8.3>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_BOOST:EARNINGS:0.70
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- ASYMMETRY:-0.1=NEGATIVE
- EARNINGS_PROXIMITY:0d<=7d
Warning (0)
none
Reward-to-Risk
-0.07
Upside
-1.0%
Downside
15.0%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
A recent news event triggered an L3 news-block on the verdict path. Trigger: Downgraded from BUY WAIT — price $319.90 has reached target $314.24. No upside to wait for. The 10-dimension scores remain Momentum at 8.3 (strongest), but ASYMMETRY:-0.1=NEGATIVE also fails — the news block is the proximate trigger, not the sole driver.
The strongest dimensions are Momentum at 8.3, Risk (lower is worse) at 7.7, and Sentiment at 7.3; the weakest are Technical at 1.8, Growth at 3.9, and Quality at 4.0. The V9 engine flagged 2 failed gates, producing an asymmetric reward-to-risk of -0.07 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Perfect Four Quarter Beat Streak
Trip ifEPS surprise falls below 0% for 2 consecutive quarters, breaking the perfect beat streak.
- P2Analyst Upside Favorable Geometry
Trip ifAnalyst consensus price target falls below $280 due to downward earnings estimate revisions.
- P3Navy Customer Concentration Risk
Trip ifU.S. Navy revenue concentration falls below 72% for 2 consecutive annual reporting periods, demonstrating meaningful customer diversification.
- P4Below Average Business Quality
Trip ifOperating margin improves above 6% for 2 consecutive quarters, demonstrating the quality constraint is lifting.