Close Menu
    Facebook X (Twitter) Instagram
    Facebook X (Twitter) Instagram
    StockNews24StockNews24
    Subscribe
    • Shares
    • News
      • Featured Company
      • News Overview
        • Company news
        • Expert Columns
        • Germany
        • USA
        • Price movements
        • Default values
        • Small caps
        • Business
      • News Search
        • Stock News
        • CFD News
        • Foreign exchange news
        • ETF News
        • Money, Career & Lifestyle News
      • Index News
        • DAX News
        • MDAX News
        • TecDAX News
        • Dow Jones News
        • Eurostoxx News
        • NASDAQ News
        • ATX News
        • S&P 500 News
      • Other Topics
        • Private Finance News
        • Commodity News
        • Certificate News
        • Interest rate news
        • SMI News
        • Nikkei 225 News1
    • Carbon Markets
    • Raw materials
    • Funds
    • Bonds
    • Currency
    • Crypto
    • English
      • العربية
      • 简体中文
      • Nederlands
      • English
      • Français
      • Deutsch
      • Italiano
      • Português
      • Русский
      • Español
    StockNews24StockNews24
    Home » Despite hitting a near-14-year high, this FTSE 250 defence superstar still looks 32% under its ‘fair value’ to me!
    News

    Despite hitting a near-14-year high, this FTSE 250 defence superstar still looks 32% under its ‘fair value’ to me!

    userBy userJune 5, 2025No Comments3 Mins Read
    Facebook Twitter LinkedIn Telegram Pinterest Tumblr Reddit WhatsApp Email
    Share
    Facebook Twitter LinkedIn Pinterest Email


    Image source: Getty Images

    FTSE 250 high-tech defence firm Chemring (LSE: CHG) is trading at a 14-year high of £5.54. The last time it traded at more than this was 1 September 2011, when it hit £5.65.

    That said, there can still be value left in the shares as price and value are different things.

    I took a deep dive into the business and ran the key numbers to get to the bottom of the firm’s valuation.

    Increased spending by NATO

    Chemring’s shares are trading at such lofty levels partly because of the increasing defence threat to the West. Most immediately this comes from Russia, but long term from China as well. 

    NATO Secretary General Mark Rutte said in December that “it is time to shift to a wartime mindset”. He added that the alliance’s members are not spending enough to prepare for a future conflict with Moscow. He concluded by urging members to “turbocharge” their defence spending.

    US President Donald Trump has suggested that the US will not protect NATO allies that are not spending enough on defence.

    The figure now being targeted by Europe’s NATO members is 5% of each country’s gross domestic product. Last year, they spent an average of 2%.

    Record order book

    Chemring’s share price rise is also up as it looks well placed to benefit from this increased spending.

    It is a world leader in the Sensors & Information, and Countermeasures & Energetics sectors. These include cutting-edge products for chemical and biological threat detection, and electronic warfare capabilities. Additionally, it produces systems for the detection of improvised explosive devices.

    It supplies 60% of NATO’s naval fleets and 85% of its air fleets. It is also a key precision technology supplier to NASA and SpaceX. And it is on the UK Ministry of Defence’s ‘trusted supplier’ list for a range of cyber defence and other systems.

    A risk here is any major failure in one of its key products. This could damage its reputation and its order book.

    That said, Chemring’s H1 2025 results looked extremely good to me. Its order book jumped 25% year on year to £1.303bn – the highest in its history. Order intake over the period soared 42% to £488m.

    Revenue rose 5% to £234.3m, while underlying earnings before interest, taxes, depreciation, and amortisation increased 12% to £39.8m. Underlying profit was up 8% to £27.1m.

    Chemring is well-positioned to increase annual revenue to £1bn by 2030 (from £510m in 2024), according to the firm.

    How does the share valuation look?

    I ran a discounted cash flow analysis to ascertain the fair value of Chemring’s shares.

    Using other analysts’ figures and my own, this shows the stock is 32% undervalued at its £5.54 price.

    Therefore, the ‘fair value’ for the stock is £8.15.

    Given its strong growth prospects and very undervalued price, I am sorely tempted to buy Chemring shares.

    However, I must remain aware of the fact that I already have holdings in BAE Systems and Rolls-Royce. Consequently, adding any more stocks in the defence sector would unbalance my portfolio.

    That said, I think it is well worth the consideration of other investors whose portfolios it suits.



    Source link

    Share this:

    • Click to share on Facebook (Opens in new window) Facebook
    • Click to share on X (Opens in new window) X

    Like this:

    Like Loading...

    Related

    Share. Facebook Twitter Pinterest LinkedIn Tumblr Telegram Email
    Previous ArticleDown 15% from its year high, is Shell’s share price too cheap for me to pass up?
    Next Article Why did the Wizz Air share price just fall 25%?
    user
    • Website

    Related Posts

    Are BP shares undervalued? | The Motley Fool UK

    June 6, 2025

    FTSE 100 shares to consider buying for a well balanced Stocks and Shares ISA

    June 6, 2025

    Prediction: in 12 months the beaten-down BP share price could turn £10,000 into…

    June 6, 2025
    Add A Comment

    Leave a ReplyCancel reply

    © 2025 StockNews24. Designed by Sujon.

    Type above and press Enter to search. Press Esc to cancel.

    %d