Update on Previous Stock Review Articles in 2019 by Samuel Leach
- Kier Group + 16% (Date of article 7 Jan)
- Jupiter Fund Management + 16.5% + Dividends due in April (Date of article 14 Jan)
- London Stock Exchange + 14.33% (Date of article 7 Jan)
- Unilever + 2.85% (Date of article 7 Jan)
- FlyBe + 25% (Date of article 28 Jan)
Looking at the stock market currently, the FTSE100 has recently broken out of the short term range with price currently at 7,340, as a result of a 4 day rally. We have Brexit currently grinding to a halt after the Speaker John Bercow not allowing the Government to present May’s European Union withdrawal agreement to the House again unless that deal substantially different from the first 2 times it was voted down. Nonetheless, we are seeing the potential of a delay of Brexit with some experts quoting a potential delay of over 8 months.
I will be exploring an interesting FTSE100 stock that could be potentially at a turning point to the upside. BAE Systems operates as a defence, aerospace, and security company worldwide. It’s Electronic Systems segment offers electronic warfare systems and electro-optical sensors, military and commercial digital engine and flight controls and many more. Currently, BAE Systems is trading 40% below it’s 2018 August highs of 680.00p, whilst since the start of 2019 the stock is up 7% at 487.50. This could potentially be the start of a bull run but let’s crunch the numbers for this stock.
Looking into the intrinsic value of the stock we can see that the current share price is £4.87 and the future cash flow value sits at £8.55. This gives a staggering 43% current discount based on the intrinsic calculation of BAE Systems. Secondly, we can see that the PE ratio is currently 15.5x which is below the Aerospace and Defense average of 19.4x and with expected annual growth of 11.3% in annual earnings I feel this stock has upside potential. Investors who are buying the stock in the next 29 days up to the 18th of April will be receiving a tidy 4.57% dividend as well on top of the upside potential.
Looking at the broker ratings we have seen 5 major broker ratings since February with two coming in March. The overall analysis is a buy rating with brokers predicting a future price between 530.00p and 600.00p. On the most recent rating on the 5th of March we had Goldman Sachs keeping their rating as a “Buy” and updated their target to 588.00p, Deutsche Bank reiterating a “Buy” rating and on the 22nd of February, we had Credit Suisse Reiterating an “ Outperform” rating with a target of 600.00p. After my deep dive analysis on BAE Systems, we have some very exciting pros for the stock summarised below.
- Overall Buy Broker Rating Targets between 530.00 – 600.00p
- Intrinsic Value currently sat at a 43% discount
- 40% off its 2018 highs
- FTSE 100 stock
- Trading below sector P/E Ratio average
- 11.3% predicted in annual earnings
- 57% dividend yield
I will be looking to add BAE Systems to my stock watchlist and keep an eye on this exciting FTSE 100 stock.