Why Booz Allen Hamilton Stock Popped Today

Booz Allen Hamilton (NYSE: BAH) stock inched 2.5% higher through 11:15 a.m. Friday, after announcing it will partner with rising defense technology star Palantir Technologies (NASDAQ: PLTR) to "accelerate defense mission innovation and help the U.S. maintain superiority against its adversaries."

The companies went on to explain that they will collaborate to build "data-centric systems that improve collaboration and combined mission planning with U.S. allies and partners."

What Booz Allen does

While best-known as a management and IT consultant, Booz Allen has for some years played a behind-the-scenes role, serving effectively as a defense contractor. (You may recall that in 2013, Booz Allen gained some level of infamy when one of its employees on a National Security Agency contract, Edward Snowden, leaked government documents before fleeing to Russia for asylum).

Now Booz will be diving even deeper into defense by allying with one of the fastest-growing defense contractors in the company, tech-focused Palantir, a leader in the use of artificial intelligence (AI) to drive defense systems, as well as in cybersecurity. The companies' press release doesn't give a lot of detail on the partnership -- and no detail at all on any financial aspects of the tie-up -- but does seem likely to involve Booz further in contracts that Palantir might win (and vice versa).

Is Booz Allen stock a buy?

It may also give investors a better way to invest in Palantir's success, without having to pay the high cost of owning Palantir stock directly -- which is a good thing.

Palantir stock, while a strong performer after gaining more than 300% over the past 52 weeks, is now quite expensive at a trailing P/E ratio of 360. Booz Allen stock, in contrast, is up just 14% over the past year, lagging the S&P 500 (SNPINDEX: ^GSPC), and Booz Allen stock costs only 22.5 times earnings.

With a 1.3% dividend yield and a 13% projected long-term earnings growth rate, Booz stock doesn't look cheap to me, exactly. But it's a lot cheaper than Palantir.

Should you invest $1,000 in Booz Allen Hamilton right now?

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