HUNTINGTON INGALLS INDUSTRIES, INC.

Where It Passes

Where It Falls Short

• Profitability6% pass✓ 13✗ 22▾

  15 of 16 flag HII's profitability — Graham, Buffett, Lynch +12 more

  Net income / market capitalization+6.07%; #1398/6340 (top 22.1%)

  ✓AsnessTop 30% of eligible cross-section✗OshaughnessyTop 10% of eligible cross-section

  Positive EPS (10 years)16/18 years positive

  ✗GrahamPositive EPS every year for 10 years

  EPS Growth (3-yr avg, 10-yr window)482.8%

  ✓Graham>= 33% growth

  Net Income Positive (10+ years)16/18 years positive

  ✗BuffettPositive every year for 10+ years

  ROE (up to 5-year arithmetic mean)15.3%

  ✓Buffett> 15% arithmetic mean (app rule)

  Operating Margin (10-yr trend)5.3% (latest)

  ✓BuffettStable or rising over 10 years

  Free Cash Flow Proxy$605.0M

  ✓BuffettPositive and growing

  Earnings Variance (10-yr CoV)0.59

  ✗BuffettCoV < 0.3

  Retained Earnings Effectiveness

  ✗Buffett$1 retained -> > $1 market value created

  Basic earnings-growth PEG (dividends excluded)P/E 19.9x (growth N/A)

  ✗Lynch< 1.0 (ideally < 0.5)

  3-5 Year EPS CAGR-2.1%

  ✗Lynch15-30% (Fast Grower); > 0% to pass

  ROE13.3%

  ✗Lynch> 15%

  EBIT / Enterprise Value5.4%

  ✗Greenblatt> 10%

  Earnings Yield + ROC AssessmentEY=5.4%, ROC=18.7%

  ✗GreenblattBoth EY > 10% and ROC > 25%

  Net Income / Total Assets4.75%

  ✓PiotroskiROA > 0

  ROA Change YoY4.53% -> 4.75% (delta: +0.22%)

  ✓PiotroskiCurrent ROA > Prior ROA

  (CFO / Total Assets) vs ROACFO/Assets=9.38%, ROA=4.75%

  ✓PiotroskiCFO/Assets > ROA

  Gross Margin Change YoY

  ✗PiotroskiImproved YoY

  Pre-Tax Income / Revenue6.8%

  ✗Dreman>= 8%

  Net Income / Shareholders' Equity13.3%

  ✓Dreman> 12%

  Margin of SafetyP/E=19.9x, P/B=2.4x

  ✗PabraiP/B < 1.5 or P/E < 15

  Return on Equity13.5% (3-yr avg)

  ✗AkreROE > 20% (3-year avg)

  Discount to Intrinsic Value-31.9% (IV=$232.10 vs Price=$306.24)

  ✗Marks>= 20% below intrinsic value

  Positive Net Income Frequency16/17 years positive

  ✓MarksPositive net income in >= 7 of last 10 years

  Operating Income / Revenue5.8%

  ✗Ackman>= 15%

  Net Income / Shareholders Equity13.3%

  ✗Ackman>= 15%

  5-Year EPS CAGR-2.1% CAGR over 5 years

  ✗Templeton> 0% (5-year EPS CAGR)

  Operating Margin Trend6.8% (2023) -> 5.3% (2025)

  ✗TempletonNon-negative operating-margin trend over 3 years

  Revenue growth vs. gross and operating margin trendrevenue up, operating margin 6.8% -> 5.3%

  ✗SleepRevenue rising; gross margin flat or falling; operating margin holding

  Gross profit / total assets

  ✗AsnessTop 30% of eligible cross-section

  Net income / positive book equity+13.35%; #1333/5226 (top 25.5%)

  ✓AsnessTop 30% of eligible cross-section

  Negative 5-year standard deviation of ROA-0.0054; #511/5884 (top 8.7%)

  ✓AsnessTop 30% of eligible cross-section

  3-5 Year Diluted EPS CAGR-2.1% over 5 years

  ✗Neff7%-20% annualized

  Positive Diluted-EPS Years10/10 years positive

  ✓Schloss>= 70% positive over 5-10 observed years (app rule)
• Efficiency13% pass✓ 2✗ 9▾

  7 of 8 flag HII's efficiency — Graham, Buffett, Greenblatt +4 more

  Current Ratio1.26

  ✗Graham>= 2.0

  ROIC (3-5 yr avg)7.7%

  ✗Buffett> 10%

  ROIC - WACC-2.3%

  ✗BuffettPositive (WACC = 10%)

  EBIT / (NWC + Net Fixed Assets)18.7%

  ✗Greenblatt> 25%

  Current Ratio Change YoY1.08 -> 1.13

  ✓PiotroskiIncreased YoY

  Revenue / Total Assets Change YoY0.95x -> 0.98x

  ✓PiotroskiImproved YoY

  Current Assets / Current Liabilities1.26

  ✗Dreman> 1.5

  Return on Invested Capital7.5%

  ✗Munger> 15%

  ROIC (high and growing)FY2023: ROIC=9.4%; FY2024: ROIC=5.4%; FY2025: ROIC=6.7%

  ✗AkreLatest 3 consecutive FYs: ROIC > 15% in each

  Reinvestment Rate x ROIC5.3% (RR=70% x ROIC=7.5%)

  ✗AkreReinvestment Rate * ROIC > 10%

  ROIC (5-year)0/5 years above 12% (latest 6.7%)

  ✗SleepROIC > 12% in a majority of years
• Valuation15% pass✓ 4✗ 24▾

  11 of 13 flag HII's valuation — Graham, Lynch, Greenblatt +8 more

  Net income / market capitalization+6.07%; #1398/6340 (top 22.1%)

  ✓AsnessTop 30% of eligible cross-section✗OshaughnessyTop 10% of eligible cross-section

  Price / 3-yr avg EPS19.8x

  ✗Graham<= 15x

  Price-to-Book Ratio2.4x

  ✗Graham<= 1.5x

  P/E x P/B46.90

  ✗Graham<= 22.5

  Basic earnings-growth PEG (dividends excluded)P/E 19.9x (growth N/A)

  ✗Lynch< 1.0 (ideally < 0.5)

  EBIT / Enterprise Value5.4%

  ✗Greenblatt> 10%

  Earnings Yield + ROC AssessmentEY=5.4%, ROC=18.7%

  ✗GreenblattBoth EY > 10% and ROC > 25%

  Price / EPS19.9x

  ✗Dreman< 12x✗Templeton< 12x (fixed ceiling; proxy for the market's cheapest 40%)

  Price / (CFO / Shares)10.0x

  ✗Dreman< 8x

  Price / Book Value per Share2.4x

  ✗Dreman< 1.2x✗Templeton< 1.5x✗SchlossP/B <= 0.80x (app cutoff)

  Valuation ReasonablenessP/E=19.9x, OE Yield=4.4%

  ✓MungerP/E < 25 or Owner Earnings Yield > 5%

  P/E or FCF YieldP/E=19.9x, FCF Yield=6.6%

  ✗PabraiP/E < 15 or FCF Yield > 10%

  P/B or P/E vs. Historical AverageP/E=19.9x, P/B=2.4x

  ✗MarksP/E < 15 or P/B < 2.0

  Discount to Intrinsic Value-31.9% (IV=$232.10 vs Price=$306.24)

  ✗Marks>= 20% below intrinsic value

  Price / FCF per Share15.1x

  ✓Ackman<= 25

  Price vs. Trailing Low174% of trailing low ($175.58)

  ✗Templeton<= 120% of trailing low (certified split-adjusted live window)

  Positive book equity / market capitalization+0.4551; #3053/6449 (top 47.3%)

  ✗AsnessTop 30% of eligible cross-section

  Price / Diluted EPS19.9x

  ✗NeffP/E <= 15x (app proxy for a P/E 40%-60% below the market)

  (EPS CAGR % + Dividend Yield %) / P/E-0.02

  ✗Neff> 0.7 (Neff's published traditional edge)

  Price / Tangible Book Value per Share6.95x

  ✗SchlossP/TBV <= 1.00x (app cutoff)

  Book Value per Share Change+175.4%

  ✓SchlossLatest BVPS >= earliest BVPS over >= 3 years (app rule)

  Revenue / market capitalization+1.1212; #1641/5247 (top 31.3%)

  ✗OshaughnessyTop 10% of eligible cross-section

  (Operating cash flow - capex) / market capitalization+2.71%; #2104/4519 (top 46.6%)

  ✗OshaughnessyTop 10% of eligible cross-section

  Trailing six-month price return through the evaluation date-22.35%; #4091/6202 (top 66.0%)

  ✗OshaughnessyTop 10% of eligible cross-section
• Verdicts25% pass✓ 3✗ 9▾

  Split decision: 8 FAIL · 5 NEUTRAL · 3 PASS

  Overall verdict

  ✗GrahamFAIL (3/9)✓BuffettPASS (4/9)✗LynchFAIL (1/7)✗GreenblattRank #1167•PiotroskiNEUTRAL (F-Score 7)✓DremanPASS (5/11)•MungerNEUTRAL (3/4)✗PabraiFAIL (0/3)✗AkreFAIL (1/6)✗MarksFAIL (3/5)•AckmanNEUTRAL (6/9)✗TempletonFAIL (3/8)✓SleepPASS (3/6)•AsnessNEUTRAL (Not ranked)✗NeffFAIL (3/6)•SchlossNEUTRAL (4/7)✗OshaughnessyFAIL (Rank #753/963 (Top 78.2%))
• Valuation models30% pass✓ 3✗ 7▾

  Models split on HII at $306.24 — fair values range $132.40–$732.15

  Graham fair value$211.58

  ✗Graham-44.7% margin vs $306.24

  Buffett fair value$381.03

  ✓Buffett+19.6% margin vs $306.24

  Greenblatt fair value$132.40

  ✗Greenblatt-131.3% margin vs $306.24

  Dreman fair value$232.10

  ✗Dreman-31.9% margin vs $306.24

  Munger fair value$273.96

  ✗Munger-11.8% margin vs $306.24

  Pabrai fair value$154.74

  ✗Pabrai-97.9% margin vs $306.24

  Akre fair value$732.15

  ✓Akre+58.2% margin vs $306.24

  Marks fair value$219.67

  ✗Marks-39.4% margin vs $306.24

  Ackman fair value$408.77

  ✓Ackman+25.1% margin vs $306.24

  Templeton fair value$223.08

  ✗Templeton-37.3% margin vs $306.24
• Debt & Leverage50% pass✓ 8✗ 7▾

  6 of 12 pass — Graham, Lynch, Dreman +3 more object

  Debt Levels0.49

  ✓MungerDebt/Equity < 0.5✗AkreDebt/Equity < 0.3

  LT Debt vs Net Current AssetsLT Debt $2.7B vs NCA $725.0M

  ✗GrahamLT Debt <= Net Current Assets

  Debt/Equity & Interest CoverageD/E: 0.49, IC: 7.8x

  ✓BuffettD/E < 0.5 AND Interest Coverage > 5x

  Total Debt / Equity0.49

  ✗Lynch< 0.33

  Cash - Long-term Debt$-2.3B

  ✗LynchPositive preferred

  LT Debt / Total Assets Change0.00% -> 0.00%

  ✓PiotroskiDecreased YoY

  Current Assets / Current Liabilities1.26

  ✗Dreman> 1.5✗SchlossCurrent ratio >= 1.50x (app cutoff)

  Total Debt / Shareholders' Equity0.49

  ✓Dreman< 0.8✓Templeton< 1.0 (fixed cap; proxy for below-sector-median leverage)✓SchlossD/E < 1.00x

  Interest Coverage & Debt/EBITDAIC=7.8x, D/EBITDA=2.5x

  ✓MarksInterest Coverage > 3x; Debt/EBITDA < 4x

  Total Debt / Shareholders Equity0.49

  ✓Ackman<= 1.0

  Negative debt-to-equity (higher means less debt)-0.4924; #2448/4210 (top 58.1%)

  ✗AsnessTop 30% of eligible cross-section
• Cash Flow50% pass✓ 7✗ 5▾

  5 of 10 pass — Lynch, Dreman, Pabrai +2 more object

  Free Cash Flow Proxy$605.0M

  ✓BuffettPositive and growing

  FCF Positive and Growing$327.0M

  ✗LynchPositive and growing

  Operating Cash Flow$1.2B

  ✓PiotroskiCFO > 0

  (CFO / Total Assets) vs ROACFO/Assets=9.38%, ROA=4.75%

  ✓PiotroskiCFO/Assets > ROA

  Price / (CFO / Shares)10.0x

  ✗Dreman< 8x

  P/E or FCF YieldP/E=19.9x, FCF Yield=6.6%

  ✗PabraiP/E < 15 or FCF Yield > 10%

  FCF Positive16/17 years FCF positive

  ✓MarksPositive FCF in majority of recent years

  (OCF - CapEx) / Market Cap2.7%

  ✗Ackman>= 4%

  Price / FCF per Share15.1x

  ✓Ackman<= 25

  Positive Operating Cash Flow frequency16/17 years positive

  ✓SleepPositive OCF in >= 70% of available years

  Operating Cash Flow - Capital Expenditures$327.0M

  ✓Neff> $0 (app proxy for a strong fundamental case)

  (Operating cash flow - capex) / market capitalization+2.71%; #2104/4519 (top 46.6%)

  ✗OshaughnessyTop 10% of eligible cross-section
• Growth50% pass✓ 7✗ 6▾

  4 of 8 pass — Lynch, Templeton, Sleep +1 more object

  EPS Growth (3-yr avg, 10-yr window)482.8%

  ✓Graham>= 33% growth

  Basic earnings-growth PEG (dividends excluded)P/E 19.9x (growth N/A)

  ✗Lynch< 1.0 (ideally < 0.5)

  3-5 Year EPS CAGR-2.1%

  ✗Lynch15-30% (Fast Grower); > 0% to pass

  Inventory Growth vs Revenue GrowthN/A (no inventory)

  ✓LynchInventory growth < Revenue growth

  EPS Growth Direction$2.54 (2009) -> $15.39 (2025)

  ✓DremanPositive over recent years

  EPS CAGR11.9% CAGR over 16 years

  ✓Dreman> 5% annualized

  Positive Net Income Frequency16/17 years positive

  ✓MarksPositive net income in >= 7 of last 10 years

  3yr Median Revenue Growth7.3%

  ✓Ackman>= 5%

  Positive EPS Growth Frequency3/5 years with positive EPS growth

  ✓AckmanPositive EPS growth in >= 3 of last 5 years

  5-Year EPS CAGR-2.1% CAGR over 5 years

  ✗Templeton> 0% (5-year EPS CAGR)

  Revenue growth vs. gross and operating margin trendrevenue up, operating margin 6.8% -> 5.3%

  ✗SleepRevenue rising; gross margin flat or falling; operating margin holding

  5-year Revenue CAGR5.9%

  ✗SleepCAGR > 7%

  3-5 Year Diluted EPS CAGR-2.1% over 5 years

  ✗Neff7%-20% annualized