The Bull Rankings scorecard — our quality-growth score is 60.1 / 100, built from three pillars scored 0–100: Quality 55, Growth 82, Value 48 (valuation is judged against sector peers).
The thesis
Huntington Ingalls Industries is a growth play that the market has undervalued. Our model gives it a 60.1/100 quality‑growth score, with Growth at 82, Quality at 55, and Value at 48. The high Growth pillar is the engine of the thesis: revenue is up 14% YoY and the company is still ramping up ship‑building contracts that will keep the top line climbing. The Value score of 48, just on the expensive side of peers, is a modest drag, not a long‑term hurdle. The current price of $279.46 sits below the analyst consensus 1‑year target of $368.42, a 32% gap to the target.
What the business actually is
HII designs, builds, overhauls, and repairs military ships in the United States. It operates three segments: Ingalls, Newport News, and Mission Technologies. The revenue engine is split between non‑nuclear ships—amphibious assault ships, surface combatants, and national security cutters for the U.S. Navy and Coast Guard—and nuclear‑powered vessels, including aircraft carriers and submarines. The company also provides refueling and overhaul services for nuclear‑powered carriers and offers naval nuclear support services such as fleet design and construction. The non‑nuclear segment is the fastest‑growing, driven by new contracts for amphibious and surface combatants, while the nuclear side delivers steady, high‑margin work.
Why it can (or can't) keep compounding
HII’s moat is its exclusive U.S. shipbuilding capability combined with a long‑term backlog that is not easily replicated. The company’s profit margin of 5% and ROE of 12.4% demonstrate that it can generate solid returns on capital even in a capital‑intensive industry. The debt‑to‑equity of 0.55 keeps leverage manageable, allowing the firm to invest in new shipyards and technology without over‑leveraging. The beta of 0.23 shows that the stock is less volatile than the broader market, a sign that the business is insulated from cyclical swings. The strongest pillar in our model is Growth at 82, reflecting a healthy revenue trajectory. Competitors cannot quickly copy HII’s integrated design‑build‑repair model, especially given the U.S. government’s preference for domestic production and the stringent certification requirements for nuclear vessels.
The valuation question
The PEG ratio of 0.86 suggests the multiple is modest for the earnings growth analysts expect. The trailing‑12‑month price‑sales of 0.8 is modest too, and the stock trades well below its 52‑week high of $460, so the market has cooled on the story. Our reverse DCF has no read here, so the anchor is the actual revenue growth of 14% YoY. Without that read, the multiples suggest the market is not paying up for the growth. The analyst consensus 1‑year target of $368.42 is 32% above the current price, a reasonable upside given the revenue growth, even though free cash flow is -$85m in the trailing period.
The bear case
The biggest risk is that the value pillar remains weak. Value at 48 sits just on the expensive side of peers even with a PEG below 1 and a price‑sales of 0.8. If the company’s backlog stalls or if new contracts are delayed, revenue growth could slip below the 14% level, eroding the growth case. A single negative quarter in the nuclear segment—where margins are higher—could swing the overall margin down, tightening the 5% profit margin and pressuring ROE. The company’s free cash flow of -$85m signals that it is still investing heavily, and any slowdown in capital expenditures could hurt future earnings.
What would change our mind
- Revenue growth falling below 10% YoY would weaken the Growth pillar.
- Profit margin slipping below 3% would erode the company’s return profile and hurt the Quality score.
- Debt‑to‑equity rising above 1.0 would increase leverage risk and could weaken the Quality pillar.
If any of these thresholds were breached, the 60.1/100 quality‑growth score would deteriorate, and the upside cushion would shrink, turning the current thesis into a cautionary stance.