Is Huntington Ingalls Stock A Real Bargain

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Huntington Ingalls Industries (HII) builds Navy ships, including submarines, aircraft carriers, destroyers and amphibious assault ships. The company trades at 16.9 times earnings, compared with 21.8 for the median S&P 500 company. Over the past twelve months, its stock returned 3.0%, compared with 13.1% for the S&P 500. If new contracts keep sales rising and its shipyards earn more on the work, Huntington Ingalls is a growing shipbuilder on sale. If not, it is fairly priced for its thin margins. How solid is that growth?

Huntington Ingalls' Sales Are Still Growing At Double Digits

The growth holds so far. Revenue for Huntington Ingalls rose 12.6% over the four quarters ended September 30, 2026, compared with 8.7% for the median S&P 500 company. The pace has eased in each quarter of fiscal 2026, however, slowing from 15.7% in fiscal Q4 2025 to 10.8% in fiscal Q3 2026.

Much of the work ahead is in hand. Led by Virginia-class and Columbia-class submarines, new contract awards in fiscal Q3 2026 took the backlog to $86.2 billion. Management said about 90% of the shipbuilding revenue it expects through 2030 is already under contract.

Has Huntington Ingalls' Margin Started To Widen?

It has, but only lately. After rising in each quarter of fiscal 2026, the operating margin for Huntington Ingalls reached 6.2% in fiscal Q3 2026, compared with 4.7% in fiscal Q3 2025.

The faster sales have not yet lifted the margin above its usual level of the past three years. The current growth pace is new: revenue grew 2.6% in the twelve months ended September 30, 2025, and the average across the last three twelve-month periods is 6.9%. Yet the twelve-month operating margin, at 5.3%, is no higher than its average over those same three periods, and well below the 19.0% of the median S&P 500 company.

Part of the latest quarter's gain came from contract adjustments. Newport News and Ingalls are the company's two shipyards. At Newport News, management said higher segment profit came primarily from contract adjustments and incentives in the Virginia-class submarine program, along with higher volumes, and Newport News's gross contract adjustments across all its programs, favorable and unfavorable, were larger than the historical norm in the second and third quarters. Ingalls went the other way. Management said a slower labor recovery held back its throughput. Its segment profit fell, and management tied that fall to its destroyer programs.

What Huntington Ingalls Is Doing About Its Margin

Management's answer is to push more work through the shipyards, an approach it says lifts margins. The company has hired over 6,000 shipbuilders so far in 2026. Shipbuilding throughput is up about 9% year to date from 2025, though management said it is trending a bit below its target.

Without giving a date, management still expects shipbuilding to reach a 9%-10% return on sales. For 2026, it guides a shipbuilding operating margin of 6% to 6.5%, on its own segment measure.

Net income over the twelve months was slightly above operating income, so part of the earnings behind the low price-to-earnings multiple comes from items outside operations. If the margin stays near its three-year average, or sales growth keeps slowing, the discount may simply be what a low-margin builder is worth.

So a buyer at this price is betting that Huntington Ingalls fixes its margin, more than that the market has missed a sound business. Sales growth, backed by the submarine backlog, has held so far. The margin is the weaker of the two, with three quarters of gains, part of them from contract adjustments. Shipbuilding operating margin for full-year 2026, against management's guide, is the number to watch when Huntington Ingalls reports in February 2027, along with its full guidance for 2027.

Does This Mean You Should Act On HII?

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