Parson's Corporation (PSN) analysis

Hi team, i've been doing some more self learning on evaluation of companies. My last one didn't go so well, so let's see if this goes better. I'll be discussing Parson's Corporation (PSN). I was looking for Buffet's "bridges" in defense and I came across this company. **Overview:** At the beginning it looks like a potpurri of products/services which can be divided into two parts: 1. Infrastructure -design and management of complex transport infrastructure buiiding i.e California high speed rail and role in "giga projets in middle east. The middle east componenet of their work has been going through a good expansion - their role is mainly construction management, designs, project supervision etc. -waste water managemnet 2. Defense -Cybersecurity -Space defense - space situation awareness, support for satellite operations -Missel defense -Zeus system - laser for neutralising landmines -Nuclear waste treatment and chemical weapns destruciton Balance sheet interpretation Why I think this company is a buy now despite the -10% revenue growth in Q32025? I think they are pivoting from an engineering/infrastructure company to defense/technology projects with higher marigns. Even though their revenue fell in Q3, their gross profit remained the same (359 -> 360 mil) Their operating margins are growing (1.7 -> 7.7%) Their FCF is I think season i.e Q1 negative as bonuses rolled out, Q4 as clients flush their remaining budgets. But even then when you compare Q1 2024 and Q12025, the hole is getting smaller over itme. Their EBITDA margin growth is also reflective of this transntion 6.3% to 8.2% **MOAT** 1. Intangible assets a) Security clearence - this takes years + millions of dollars to hire this speciic workforce b) Long term relationshiop with federal government 2. High switching costs (project dependent) -For middel east Giga proejcts - they are the lead integrator. Replacing this team would be very challenging -propietry software for smart cities - iNET sowtware for managing city infrastructures- traffic management software - it seems almsot impossibleto change this out - has also been changed to a software as service model - no more one time fees high margin subscriptoin. iTWIN is needed after the city have finished their massive infastrucure upgrade for ongoing management of issues that ocme up inthe city 3. Combination of 1 + 2 -leads to wins like buidling infrascture in rmeotee locations for Ind-Pacific deterrence - 15 billion award in 2025 4. Backlog -Bcklog to revenue ratio of 1.4x. It will further increase in 2027/2028 and potentially peak in 2028-2020 as the middel east giga proects will peak then. -Defense - CTRIC IV - 10 year contract 3.5 billion award in late 2025 -Book to bill ratio of 1.x orhigher for last 20 consec quarters. **Intrinsic value calculation:** 1. Critical infrastructure 2026 EBITDA - 310 million. Marklet multiple of 10-12x = 3.4 billion 2. Defense.cyper secuirty 2026 EBITDA - 340 million. Market multiple of 16-18x = 5.8 billion Total enterprise value - 9.2 billion. Remove of ebt of 818 million. Intrnsic value of 76. Total debt 1.24 billion. cash on hand 422 million. Net debt 818 million. 110 million shares -> 73.6 per share. Currently at 76. **My position:** I got in at 63.6 per share and I am planning on adding in feb/arch as I anticipate a price drop given what their pattern thus far. I think the Altamira will increase their margins and pushe them towards a tech industry - management beleiv i tiwll add 200m revenue. I think ther total 2026 project revenue will be 6.92. I dn't think the icnrease in EBITDA margin of Altamira has been priced in and I don't think the move to software/integration of the giga projects in Saudi ahve priced in. EBITDA will be 745 mil \[6.9 bil x 10%( EBITDA margin)\] giving them an equity value of 9.61 billion. Therefore 87.36 share price at end of 2026. Therefore, I will continue add whenever their share price drops below 73. I will plan to exit at 85-90. Let me know what you think.