Amentum (AMTM)

Government engineering solutions provider Amentum Holdings (NYSE:AMTM) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 10.1% year on year to $3.93 billion. The company expects the full year’s revenue to be around $14.13 billion, close to analysts’ estimates. Its non-GAAP profit of $0.63 per share was 6.5% above analysts’ consensus estimates.

Company Overview

With operations spanning approximately 80 countries and a workforce of specialized engineers and technical experts, Amentum Holdings (NYSE:AMTM) provides advanced engineering and technology solutions to U.S. government agencies, allied governments, and commercial enterprises across defense, energy, and space sectors.

The sector has historically benefitted from steady government spending on defense, infrastructure, and regulatory compliance, providing firms long-term contract stability. However, the Trump administration is showing more willingness than previous administrations to upend government spending and bloat. Whether or not defense budgets get cut, the rising demand for cybersecurity, AI-driven defense solutions, and sustainability consulting should benefit the sector for years, as agencies and enterprises seek expertise in navigating complex technology and regulations. Additionally, industrial automation and digital engineering are driving efficiency gains in infrastructure and technical consulting projects, which could help profit margins.

Amentum's competitors include major government contractors such as Booz Allen Hamilton, Leidos Holdings, SAIC, KBR, CACI International, and Parsons Corporation. In certain markets, it also competes with large defense contractors like Lockheed Martin, Northrop Grumman, and RTX Corporation, as well as specialized environmental services firms like Fluor Corporation and Bechtel.

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $14.39 billion in revenue over the past 12 months, Amentum is a behemoth in the business services sector and benefits from economies of scale, giving it an edge in distribution. This also enables it to gain more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices. However, its scale is a double-edged sword because it’s harder to find incremental growth when you’ve penetrated most of the market. To expand meaningfully, Amentum likely needs to tweak its prices, innovate with new offerings, or enter new markets.

As you can see below, Amentum’s 2.4% annualized revenue growth over the last three years was sluggish. This shows it failed to generate demand in any major way and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a stretched historical view may miss recent innovations or disruptive industry trends. Amentum’s annualized revenue growth of 3.7% over the last two years is above its three-year trend, but we were still disappointed by the results.

This quarter, Amentum reported year-on-year revenue growth of 10.1%, and its $3.93 billion of revenue exceeded Wall Street’s estimates by 9%.

Looking ahead, sell-side analysts expect revenue to decline by 1.8% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will face some demand challenges.

Amentum was profitable over the last four years but held back by its large cost base. Its average adjusted operating margin of 6.8% was weak for a business services business.

On the plus side, Amentum’s adjusted operating margin rose by 3 percentage points over the last four years, as its sales growth gave it operating leverage.

This quarter, Amentum generated an adjusted operating margin profit margin of 7.5%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Amentum’s EPS grew at an unimpressive 9.3% compounded annual growth rate over the last two years. This performance was better than its 2.4% annualized revenue growth but doesn’t tell us much about its efficiency because its operating margin didn’t expand during this time.

In Q3, Amentum reported adjusted EPS of $0.63, up from $0.48 in the same quarter last year. This print beat analysts’ estimates by 6.5%. Over the next 12 months, Wall Street expects Amentum’s full-year EPS of $2.23 to grow 7.1%. This is unusual as its revenue and operating margin are anticipated to fall, signaling the increase likely stems from "below-the-line" items such as taxes.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Amentum has shown poor cash profitability over the last four years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.3%, lousy for a business services business.

Taking a step back, an encouraging sign is that Amentum’s margin expanded by 1.2 percentage points during that time. We have no doubt shareholders would like to continue seeing its cash conversion rise as it gives the company more optionality.

Amentum’s free cash flow clocked in at $261 million in Q3, equivalent to a 6.6% margin. Its cash flow turned positive after being negative in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Amentum historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 3.7%, lower than the typical cost of capital (how much it costs to raise money) for business services companies.

Amentum reported $437 million of cash and $3.94 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.10 billion of EBITDA over the last 12 months, we view Amentum’s 3.2× net-debt-to-EBITDA ratio as safe. We also see its $353 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Amentum blew past analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its full-year EPS guidance missed. Overall, this print had some key positives. The stock remained flat at $30.21 immediately after reporting.

Updated: December 4, 2025 at 11:02 PM EST

Before making an investment decision, investors should account for Amentum’s business fundamentals and valuation in addition to what happened in the latest quarter.

Amentum isn’t a terrible business, but it doesn’t pass our quality test. To kick things off, its revenue growth was weak over the last three years, and analysts expect its demand to deteriorate over the next 12 months. And while its scale makes it a trusted partner with negotiating leverage, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities. On top of that, its low free cash flow margins give it little breathing room.

Amentum’s P/E ratio based on the next 12 months is 11.9x. This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $33.45 on the company (compared to the current share price of $29.10).