Parsons (PSN) AI Stock Analysis

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Parsons

(NYSE:PSN)

73Outperform

Parsons exhibits strong financial health with consistent revenue and profit growth, supported by effective cost management. While technical indicators show neutral momentum, the stock's valuation appears high, potentially limiting upside. The positive outlook from the earnings call, despite some challenges, supports a stable growth trajectory.

Positive Factors

Competitive Positioning

Parsons has a strong competitive positioning and execution in both the defense and infrastructure segments.

Management and Growth

Parsons Corp's management is considered best in class and has achieved significant growth with the XATOR acquisition, reaching over $1.5 billion by 2024.

Organic Growth

Core business excluding the Confidential Program is projected to deliver 15% organic growth year-over-year in 2025.

Negative Factors

Confidential Program Impact

The unwinding of the Confidential Program is expected to create a significant headwind in 2026, affecting revenue and growth targets.

Contract Uncertainty

There is a significant risk associated with a ~$725M annual revenue contract for a confidential humanitarian customer, which is under review by the Trump administration.

Financial Performance

The Confidential Program's reduction in scope has led to lower margins, contributing to a dilution in financial performance.

Parsons (PSN) vs. S&P 500 (SPY)

Market Cap

$6.70B

Dividend YieldN/A

Average Volume (3M)1.49M

Price to Earnings (P/E)17.0

Beta (1Y)0.60

Revenue Growth16.61%

EPS Growth1279.09%

CountryUS

Employees20,000

SectorTechnology

Sector Strength66

IndustryIndustrial - Machinery

Share Statistics

EPS (TTM)0.78

Shares Outstanding106,874,985

10 Day Avg. Volume1,836,016

30 Day Avg. Volume1,486,003

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.00

Price to Cash Flow (P/CF)0.00

P/FCF Ratio0.00

Enterprise Value/Market Cap1.16

Enterprise Value/RevenueN/A

Enterprise Value/Gross Profit5.54

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$80.00

Price Target Upside24.92% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering9

Parsons Business Overview & Revenue Model

Company DescriptionParsons Corporation (PSN) is a leading provider of technology-driven solutions in the defense, intelligence, and critical infrastructure markets. The company offers a wide range of services, including cybersecurity, engineering, construction, technical services, and software development, catering to the needs of government and commercial clients. With a focus on sustainability and innovation, Parsons leverages advanced technologies to address complex challenges in various sectors.

How the Company Makes MoneyParsons Corporation makes money primarily through government contracts and commercial contracts in its core markets of defense, intelligence, and critical infrastructure. The company's revenue streams are generated from providing engineering services, cybersecurity solutions, and project management services. Key sources of revenue include long-term contracts with the U.S. Department of Defense, federal civilian agencies, and state and local governments. Parsons also collaborates with commercial clients in industries such as transportation, energy, and environmental services. Strategic partnerships and acquisitions further enhance its capabilities and market reach, contributing to its financial performance.

Parsons Financial Statement Overview

Summary

Parsons demonstrates strong financial health with robust revenue growth and improved profit margins. The balance sheet is stable with a moderate debt-to-equity ratio and strong equity base, while cash flow generation is solid, indicating effective cash management and financial flexibility.

Income Statement

Very Positive

Parsons has demonstrated a strong income statement with robust revenue growth, particularly noticeable in the transition from 2023 to TTM 2025. The gross profit margin has notably increased, suggesting improved efficiency. Both EBIT and net profit margins show solid performance, indicative of effective cost management and operational efficiency. The TTM data reflects a net profit margin of 6.03%, highlighting profitability strength.

Balance Sheet

Positive

The company's balance sheet is stable with a moderate debt-to-equity ratio of 0.56 in TTM, indicating balanced leverage. The equity ratio stands at 45.05%, suggesting a strong equity base relative to total assets. Return on equity improved to 16.65% in TTM, reflecting efficient use of equity to generate profits, although there is room for improvement in asset management.

Cash Flow

Very Positive

Parsons shows strong cash flow generation, with a healthy operating cash flow to net income ratio of 1.41 in TTM, indicating solid cash conversion. Free cash flow has grown steadily, with a notable increase from 2024 to TTM, enhancing financial flexibility. The company maintains a strong free cash flow to net income ratio of 1.28, showcasing efficient cash management.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
6.75B	5.44B	4.20B	3.66B	3.92B
	Gross Profit
1.41B	1.21B	946.72M	852.82M	876.86M
	EBIT
428.07M	288.36M	185.67M	132.45M	177.81M
	EBITDA
518.48M	415.52M	309.91M	274.49M	310.35M
	Net Income Common Stockholders
235.05M	161.15M	96.66M	88.95M	98.54M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
453.55M	272.94M	262.54M	342.61M	483.61M
	Total Assets
5.49B	4.80B	4.20B	3.83B	3.94B
	Total Debt
1.42B	927.15M	914.17M	796.72M	826.60M
	Net Debt
967.50M	654.21M	651.63M	454.11M	342.99M
	Total Liabilities
2.95B	2.43B	2.10B	1.89B	2.08B
	Stockholders Equity
2.42B	2.29B	2.04B	1.90B	1.81B
Cash Flow		Free Cash Flow
474.39M	367.30M	206.93M	184.47M	255.13M
	Operating Cash Flow
523.61M	407.70M	237.53M	205.57M	289.16M
	Investing Cash Flow
-556.72M	-375.97M	-417.47M	-240.91M	-346.37M
	Financing Cash Flow
218.75M	-21.87M	100.37M	-106.50M	348.23M

Parsons Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price64.04

Price Trends

50DMA

61.48

Positive

100DMA

72.96

Negative

200DMA

85.74

Negative

Market Momentum

MACD

0.19

Positive

RSI

50.59

Neutral

STOCH

28.41

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PSN, the sentiment is Neutral. The current price of 64.04 is below the 20-day moving average (MA) of 64.74, above the 50-day MA of 61.48, and below the 200-day MA of 85.74, indicating a neutral trend. The MACD of 0.19 indicates Positive momentum. The RSI at 50.59 is Neutral, neither overbought nor oversold. The STOCH value of 28.41 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for PSN.

Parsons Risk Analysis

Parsons disclosed 54 risk factors in its most recent earnings report. Parsons reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Parsons Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SPXC	80 Outperform	$6.93B	34.31	15.24%	―	10.78%	30.05%
PSN	73 Outperform	$6.70B	16.97	17.75%	―	16.61%	1279.09%
FLS	73 Outperform	$6.10B	22.13	14.00%	1.80%	4.23%	20.40%
MIDD	70 Outperform	$7.26B	17.13	12.33%	―	-2.56%	11.51%
GNRC	67 Neutral	$6.78B	19.82	14.29%	―	8.07%	58.67%
RRX	66 Neutral	$7.41B	37.98	3.69%	1.12%	-10.19%	―
Sector *	60 Neutral	$10.83B	10.47	-6.71%	2.99%	7.73%	-12.97%

* Technology Sector Average

Performance Comparison

PSN

Parsons

64.04

-14.54

-18.50%

FLS

Flowserve

47.91

-0.88

-1.80%

GNRC

Generac Holdings

120.59

-16.93

-12.31%

RRX

Regal Rexnord

132.19

-27.41

-17.17%

SPXC

SPX

149.36

8.90

6.34%

MIDD

The Middleby

139.59

1.50

1.09%

Parsons Earnings Call Summary

Earnings Call Date:Apr 30, 2025

(Q1-2025)

% Change Since: -6.73%|

Next Earnings Date:Jul 30, 2025

Earnings Call Sentiment Positive

The earnings call reflects a strong overall performance with record financial metrics, robust backlog, and strategic alignment with significant defense budgets. However, challenges include the impact of a paused confidential contract and increased SG&A expenses. Despite these challenges, the strong growth in critical infrastructure and alignment with federal priorities suggest a positive outlook.

Q1-2025 Updates

Positive Updates

Record First Quarter Results

Parsons achieved record first quarter results for total revenue, net income, earnings per share, adjusted EBITDA, and adjusted EBITDA margin.

Strong Backlog and Book-to-Bill Ratio

Total backlog and funded backlog are at all-time highs, with a book-to-bill ratio of 1.1 times, supported by 1.4 times in the Critical Infrastructure segment.

Critical Infrastructure Segment Growth

The segment saw a 14% revenue increase, driven by 8% organic growth and acquisitions, with adjusted EBITDA margin reaching 10.3%, a company record.

Federal Solutions Segment Alignment

The segment aligns with major budget areas, including a potential $1 trillion defense budget in fiscal year 2026, and saw 8% revenue growth excluding the confidential contract.

High Employee Retention

Achieved the best employee retention rates since 2020, which supports the company's ability to execute projects effectively.

Negative Updates

Confidential Contract Impact

The confidential federal contract is operating at a reduced volume due to a presidential executive order, affecting revenue growth.

Federal Solutions Margin Decline

Federal Solutions adjusted EBITDA margin decreased 120 basis points to 9%, primarily due to contract mix.

SG&A Expenses Increase

SG&A expenses increased 10% year-over-year, driven by recent acquisitions and were 15.7% of total revenue compared to 14.4% in the prior year period.

Company Guidance

During the first quarter of 2025, Parsons reiterated its guidance metrics, anticipating total revenue between $7.0 billion and $7.5 billion, reflecting a 7% growth at the midpoint and 5% organic growth. Excluding the confidential contract, the company projects total revenue growth of 18% and organic growth of 15%. Record financial results were achieved, with total revenue reaching $1.6 billion, a 1% increase year-over-year, and adjusted EBITDA margins at 9.6%. The company reported a book-to-bill ratio of 1.1 times and a total backlog of $9.1 billion, with a funded backlog at an all-time high of 69%. Additionally, Parsons highlighted a strong pipeline of $55 billion and over $12 billion in contract wins yet to be booked.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.