SAIC

Science Applications International ($SAIC) Executives Make 25 Stock Purchases Amid 31% Decline, Betting on "DOGE Fear Overreaction"

01/06/2026 21:04

Science Applications International ($SAIC) executives have been aggressively buying shares during a 31% stock decline from May through November 2025, with the most recent purchase by EVP Prabu Natarajan on December 16 at $100.49 per share for $200,976. This marks the 25th insider purchase since June 2024, compared to just one sale during the same period. SAIC is a mid-cap defense and government IT services contractor with $7.5 billion in annual revenues, providing IT modernization, digital engineering, and weapon systems support to the U.S. Department of Defense and intelligence agencies. The company employs approximately 24,000 people and competes with Leidos Holdings and CACI International. The insider buying concentrated during the stock's plunge from $123.41 in May to $85.01 in November—a 31% drop. CEO Toni Townes-Whitley purchased $223,332 worth of shares at $111.67 in March, while EVP Vincent DiFronzo bought $64,984 at $108.85 the same month. The stock has recovered 17% from November lows to $102.44 currently, but remains 17% below its 2025 high. What makes this insider confidence particularly noteworthy is the solid backing from earnings and contract wins. SAIC beat Q3 estimates with EPS of $2.58 versus consensus of $2.17—a 19% beat. Revenue reached $1.87 billion, up 4.3% year-over-year. Q2 also delivered an earnings beat at $2.58 versus $2.07 expected. Moreover, the company secured $1.17 billion in new contracts during the past six months: a $928 million prototype engineering contract in June and a $242 million Navy propulsion test facility contract in November. The cumulative book-to-bill ratio stands at 1.4x, indicating strong future revenue visibility. Yet the market has been unforgiving. The primary culprit is Trump administration's Department of Government Efficiency (DOGE) initiative. When Elon Musk's budget-cutting plans emerged, defense contractor stocks plunged in mid-November. SAIC fell 15% in a single day (from $148.01 to $125.91), hit particularly hard due to high government contract exposure. The company lowered FY2026 revenue guidance to $7.25-$7.325 billion, projecting 2-3% organic revenue contraction. CFO Prabhu Natarajan cautioned that "we have to assume things get worse before they get better." Insiders saw it differently. When the stock fell back to the $105-113 range in late March, eight executives and directors—including the CEO—bought shares in a coordinated wave totaling over $620,000 in one week. This wasn't token buying: the CEO deployed $223,332 and EVP Natarajan added $219,098. The most recent December 16 purchase saw Natarajan commit another $200,976. They appear to believe current valuation doesn't reflect fundamentals. The numbers support that view. SAIC trades at a forward P/E of just 10.71x, well below defense sector averages and the S&P 500's roughly 20x multiple. Return on equity stands at 23.75%, among the sector's highest, while operating margin is a healthy 10.5%. The debt-to-equity ratio of 175% is manageable, and levered free cash flow totals $236.88 million. The company has paid dividends for 13 consecutive years, currently yielding 1.38%. Citigroup initiated coverage in December with a Buy rating and $122 price target—19% upside from current levels. Investors should monitor several key criteria. First, whether quarterly EPS exceeds the low end of guidance ($9.80). The company beat consensus for four straight quarters, but meeting revenue guidance is crucial for restoring confidence. Second, watch new contract awards and book-to-bill trends. Maintaining the current 1.4x ratio would alleviate revenue decline concerns. Third, organizational restructuring impact—the company is consolidating from five business units to three, and margin improvement would validate this strategy. Finally, track actual government budget execution and DOGE initiative impacts. Defense stocks rallied after Musk stepped back from the DOGE role, which is positive, but structural budget pressures may persist. Warning signs include the CEO transition. On October 23, CEO Townes-Whitley resigned and director James Reagan was appointed interim CEO. Leadership gaps could weaken strategy execution. Q3 and Q4 results face 5.5% quarterly organic revenue declines, which could trigger further weakness. Government procurement delays and workforce turnover also pressure near-term results. The leveraged balance sheet (175% debt/equity) could strain interest coverage if Fed rate cuts slow. Scenario analysis suggests several paths. In the bull case, DOGE fears prove overblown and government procurement normalizes in H2 2026 as new contracts convert to revenue. Organizational restructuring improves margins and a new CEO resolves uncertainty, pushing the stock toward Citi's $122 target—19% upside. The base case sees revenue declines proceed as guided but profitability maintained. The 1.4x book-to-bill provides foundation for FY2027 growth recovery, with shares trading in the $110-115 range. The bear case involves intensified budget cuts and contract delays causing FY2026 EPS to miss the low end ($9.80), potentially pushing the stock back to the low $90s. Transition triggers include December 4 earnings, FY2027 guidance, and Trump administration's Q1 budget proposal. Near-term (1-6 months), expect volatility. December earnings could provide a positive catalyst, but January-February budget uncertainty may cap upside. Analyst consensus of $116.40 implies 14% upside potential. Technically, the $100 support level is critical. Breaking below the November low of $85.01 would signal further downside, but insider buying concentrated at $100-113 suggests valuation appeal in this range. Near-term momentum depends on December earnings, new CEO timing, and Trump's first budget proposal (expected February). Long-term (6+ months), structural defense and government IT demand remains the key driver. Strategic competition with China, cybersecurity threats, and AI-driven defense modernization provide sustained demand. SAIC's AI solutions and digital engineering capabilities align with these trends. The company's 0-3% growth projection for FY2027 may prove conservative. However, defense budgets' political nature and intensifying competition from larger contractors like Leidos (market cap $25.3 billion) and CACI ($12.4 billion) pose long-term risks. SAIC's smaller $5 billion market cap could make it an acquisition target. In conclusion, SAIC appears oversold as markets overreacted to near-term uncertainty. Repeated insider buying signals internal confidence in fundamentals. Forward P/E of 10.71x and ROE of 23.75% indicate sector undervaluation. The $1.17 billion in new contracts and 1.4x book-to-bill support FY2027 recovery potential. However, CEO transition and government budget uncertainty create near-term volatility. For investors, the $100-105 range appears to be insider-validated value territory, though downside risk to $85 exists. December earnings will be a critical inflection point. With solid cash flow and stable dividends, the stock merits consideration for long-term value investors, but short-term traders should exercise caution around volatility. As with all government contractors, budget cycles and political risk require constant monitoring.