Investing.com -- Government services stocks are now trading at their largest discount to the broader market since 2012-13, as concerns over DOGE (Department of Government Efficiency) initiatives and slowing operations and maintenance (O&M) growth weigh on sentiment, according to Barclays (LON: BARC ) analysts.

The sector, which has underperformed the S&P 500 by 40% since the election and by 20% since the start of earnings season, now trades at a 30% discount to the market on a next-12-month (N12M) EBITDA basis, Barclays stated in a note Tuesday.

They explain that on a price-to-earnings (PE) basis, the discount has widened to 40%, up from the 10-20% range seen before the election.

This is the “largest discount since 2012-13 when the DoD budget was declining,” Barclays wrote. The sector has historically traded at a 5-10% discount over the past five years.

The bank adds that relative to defense stocks, government services firms are trading at a 20% discount on both EV/EBITDA and PE, levels last seen during budget uncertainty in 2012-13 and 2017-18.

Among individual stocks, Barclays says Booz Allen (NYSE: BAH ) Hamilton trades at 13x N12M EV/EBITDA, a 20% discount to the S&P, compared to its five-year average of 15x.

In addition, they state that CACI International, Leidos, and Science Applications (NASDAQ: SAIC ) International Corp. each trade at 10x N12M EV/EBITDA, a 35% discount to the S&P, compared to their historical 10-15% discount levels.

Despite compressed valuations, Barclays highlighted that organic growth has accelerated over the past two years, and margins have expanded, particularly for LDOS due to its high-margin VBA exam business.