Parsons has gotten torched over the last six months - since March 2026, its stock price has dropped 32% to $46.15 per share. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is there a buying opportunity in Parsons, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Parsons Not Exciting?
Even though the stock has become cheaper, we’re cautious about Parsons. Here are three reasons we avoid PSN, plus one stock we’d rather own.
1. Weak Backlog Growth Points to Soft Demand
In addition to reported revenue, backlog is a useful data point for analyzing Defense Contractors companies. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into Parsons’s future revenue streams.
Parsons’s backlog came in at $9.26 billion in the latest quarter, and over the last two years, its year-on-year growth averaged 1.1%. This performance was underwhelming and suggests that increasing competition is causing challenges in winning new orders. 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Parsons’s revenue to rise by 4.1%. While this projection implies its newer products and services will fuel better top-line performance, it is still below the sector average.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Parsons historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.9%, somewhat low compared to the best industrials companies that consistently pump out 20%+.
Final Judgment
Parsons’s business quality ultimately falls short of our standards. Following the recent decline, the stock trades at 14.8× forward P/E (or $46.15 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We’re pretty confident there are more exciting stocks to buy at the moment. Let us point you toward a top digital advertising platform riding the creator economy.
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