Palantir Is Priced for Perfection. These 2 Defense Stocks Are Priced for Pessimism.

Palantir Technologies (NASDAQ: PLTR) is one of the most talked-about names in the defense space right now. But the company has one big problem: it's priced for perfection. Any bad news could be enough to send the stock crashing.

Trading at a 159 times trailing earnings (price-to-earnings) multiple, the company looks exceedingly expensive to many investors. And while I like the business, I'm a little wary of its consistently elevated valuation.

Image source: Getty Images.

So I shopped around in the defense sector to see if there were other candidates offering better value, and, as luck would have it, I found two defense stocks priced for pessimism: Booz Allen Hamilton (NYSE: BAH) and Science Applications International Corp. (NASDAQ: SAIC).

But the question now is, are these low valuations enough to justify a buy, or is the market pricing these companies cheaply for good reason?

Let's find out.

Booz Allen Hamilton: Cheap for a reason, or a hidden bargain?

Booz Allen Hamilton aligns more closely with Palantir's data-heavy approach. It provides consulting, engineering, and data analytics services to U.S. agencies. Notably, the company has won several high-profile contracts, the largest of which is a $1.58-billion deal under the Weapons of Mass Destruction Analysis, Exploitation, and Data Science Support (WAEDS) initiative in 2025.

However, Booz Allen Hamilton hit a speed bump when Treasury Secretary Scott Bessent canceled $21 million in U.S. Treasury contracts with the company in January 2026 over a data leak that occurred between 2018 and 2020.

Combine that with slower federal funding, the government shutdown at the end of 2025, and a 4.2% and 27% decrease in its top and bottom lines in its latest quarter, and the stock hasn't been the same since, falling from over $90 in January to around $76 today.

But there is a silver lining in all these gray clouds. Free cash flow remains strong, and total backlog has increased by 3.2% to $39 billion. COO and President Kristine Anderson adds, "Demand remains strong and funded backlog was up 23%." And despite lower revenue, the company expects a low-single-digit sales growth rate by the end of the fiscal year.

Another thing that Booz Allen has going for it is its current valuation; the stock trades at a trailing P/E of just 11.88, a massive discount from the sector median of 26.08.

Now, Wall Street still rates the stock a Hold, but at this point, Booz Allen only needs to stay the course, meet its guidance, and work on recovering from recent blunders to give the market a compelling case for a turnaround.

Science Applications International is up almost 27% in 2026

Science Applications International is another interesting pick, but for different reasons than Booz Allen.

Unlike Booz Allen, SAIC is up almost 27% year-to-date. Growth was primarily driven by strong second-quarter numbers, headlined by $1.88 billion in revenue and an expansion in operating margins.

The company also recently won several contracts, including a $400 million recompete deal to support an unnamed U.S. intelligence agency. Like Booz Allen, SAIC provides clients with engineering, technical integration, and mission support services.

And you know what's even better? SAIC is trading at 15 times earnings, again lower than the sector median, making the stock look like a bargain compared to Palantir's 159.

Analysts have a consensus "Hold" rating for SAIC, though with a marginally higher consensus than Booz Allen, suggesting the bar for the company to exceed expectations is already low. And that makes any good news feel like a big surprise.

Are these value plays worth the risk?

Palantir may be the bigger AI and defense story, but its sky-high valuation leaves little room for anything to go wrong. Today, Booz Allen Hamilton and SAIC may offer better opportunities, despite being priced for pessimism.

Rick Orford has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Booz Allen Hamilton and Palantir Technologies. The Motley Fool has a disclosure policy.