The FTSE 250 index is home to numerous promising growth stocks, particularly in the thriving defense sector. While larger companies like BAE Systems are often highlighted, several smaller firms provide valuable investment opportunities.
Top Underrated FTSE 250 Defense Stocks
-
Goodwin (LSE: GDWN)
This family-run engineering group has been operational since 1883. It specializes in precision engineering for defense, energy, and industrial applications. Last year, Goodwin saw impressive growth, with its share price soaring 225% over the year and 695% over the past five years. After reporting a 47% increase in profits, the company recorded £35.5 million on revenues of £220 million.
Goodwin has also teamed up with a significant US submarine program, contributing to its success. However, it currently has a high price-to-earnings (P/E) ratio of 71, making it less attractive for new investors.
-
Chemring Group (LSE: CHG)
A manufacturer of defense countermeasures and explosives, Chemring Group has seen shares rise by 62% over the past year. It reported a 31% increase in pre-tax earnings for the year ending on October 31. The company noted total orders had climbed to £1.35 billion, a 20% increase.
Chemring aims to double its revenue to approximately £1 billion by 2030. With a much lower P/E ratio of 27.5 compared to Goodwin, it offers better value for investors looking for solid future growth.
-
Qinetiq Group (LSE: QQ)
Though trailing behind other defense stocks, Qinetiq has a lower P/E ratio of 19.2, making it a potentially attractive option. The company’s shares increased by 22% in the past year, despite a 4.9% drop in first-half earnings to £900.4 million. Key factors include restructuring within its North American operations and order delays.
However, Qinetiq has secured £2.42 billion in orders, a 133% increase year-on-year, reflecting its robust market position. The firm has also landed a £316 million contract with the Royal Navy to deliver counter-drone capabilities, signifying growth in the robotic warfare sector.
Market Outlook for Defense Stocks
Investors are closely monitoring geopolitical factors impacting the defense sector, particularly the ongoing conflict in Ukraine. Economic stability, supply chain concerns, and potential peace agreements could alter market dynamics soon.
While Goodwin and Chemring have shown remarkable growth, Qinetiq presents a compelling narrative with its modest valuation. Investors should assess their positions carefully, considering current exposure to leading firms like BAE Systems and Babcock.
In conclusion, the FTSE 250 presents several underrated defense stocks, each with unique attributes and growth potential. As geopolitical conditions evolve, these companies may soar alongside industry leaders.
