Olin Just Won a $788 Million Army Contract. Is Olin Stock a Buy?

Families have Christmas. Defense investors have Sept. 30.

Much like Dec. 25 is the culmination of a year's worth of shopping for consumers, Sept. 30 marks the end of the federal government's fiscal year. And that means, if you're a defense investor, you can look forward to an unusually large number of unusually large defense contracts being awarded this month.

The truly humongous awards won't start dropping until about the last week or two of the month, when the Pentagon realizes it's running out of time to buy everything Congress has approved before the fiscal year ends. But already today, we're seeing some pretty sizable contracts dropping at the Pentagon.

Image source: Getty Images.

$788 million for Olin

The U.S. Army awarded Olin (NYSE: OLN), a mid-cap manufacturer of chemicals that also owns the Winchester ammunition company, $788.4 million to purchase small-arms ammunition. Between now and Sept. 10, 2031, Olin will manufacture and deliver to the army literally millions of rounds of 5.56mm, 7.62mm, and caliber .50 ammunition.

Does that sound like a big deal? Well, it is, and it isn't. To put the contract in context, you need to know two things: first, how much money Olin already makes in a year, and second, how much more money Olin stands to make when this new contract kicks in.

The answer to the first question is $6.8 billion -- that's how much revenue Olin took in in 2025. And $157.7 million answers the second question. That's how much more revenue Olin will collect per year if you divide the new $788.4 million contract over the five years it's in effect.

Result: Winning this Army contract will add at most 2.2% to Olin's annual revenue stream.

What it means for investors

That's not nothing. (It's actually $157.7 million more than nothing!) But it's probably not enough, in and of itself, to move the needle on Olin stock. And that means investors should first evaluate Olin on its merits as-is.

The good news is that investing in Olin stock does have some merit.

While technically "unprofitable," Olin generated close to $100 million in positive free cash flow over the past 12 months, and analysts polled by S&P Global think the company will end 2026 with nearly $180 million in FCF -- growing to $300 million in 2027.

For a $2 billion company, that makes for an attractive valuation. Even after accounting for the company's more than $3.2 billion in net debt, Olin stock trades at less than 29 times trailing free cash flow. Although that's not an obviously cheap valuation, when you consider how fast analysts expect free cash flow to grow -- and the potential for a big Army contract to help it grow even faster -- Olin stock actually looks like a pretty good bet.

I think it's a buy.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.