Stock market

39% increase in the order book of NATO supplier Camring! Are UK stocks a reasonable buy now?

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UK stock Camming (LSE: CHG) today (4 June) reported encouraging half-year results for the period to 30 April.

The global business makes high-technology products and services for the aerospace, defense and security markets.

Chief executive Michael Ord said the company is a key supplier to the security alliance NATO (North Atlantic Treaty Organization).

A developing defense sector

Ord believes that increasing geopolitical tensions around the world are one reason. “Basic” The rearmament upcycle, and is likely to continue. “atleast” next decade.

There was momentum in business during 2023 and it continued till 2024. after this “Record” Order volumes The company has an order book worth more than £1bn – up 39% at the end of April compared to a year ago.

Ard said there is a good outlook for future earnings and potential earnings. The business also attracts grant funding, and customers are moving toward long-term partnership agreements with the company.

These positives have given directors the confidence to invest in further capability and capacity to strengthen Camering’s position as a key supplier to NATO, and “Positioning the Group well for the future”.

The outlook is strong, and directors aspire to grow annual revenue to around £1bn by 2030. To put that into context, the firm posted revenues of £473m in the trading year to October 2023. Therefore, prediction is fast. , and have the ability to invest in stocks for the long term.

However, the rest of today’s data is a mixed bag. Revenue grew 8% year-over-year, but underlying weak revenue declined 11%.

Net debt rose 201% to just over £75m, driven by the directors’ decision to invest more in operations. However, this did not stop them from increasing the interim dividend to 13%.

Meanwhile, the market has seen a better outlook for the company. Shares are up nearly 49% since the fall of 2023.

City analysts have forecast normalized earnings of just over 10% for the next trading year, October 2025, and expect a similar rise in the dividend.

Diagnosis is seen with events.

With a share price of around 386p and against these estimates, the forward earnings multiple is just over 17, and the expected dividend yield is just under 2.3%.

Comparison of this value FTSE All Share Index at just 12 with a forward yield of about 3.7%.

So Chemring isn’t cheap and probably stuck with the defensive theme. Investors are piling into stocks in the sector. There is some risk in this situation for shareholders. If the company fails to meet its projections, the stock price may fall.

If anything changes in the general geopolitical outlook, governments could reduce their defense spending and that could pull the rug out from under the company’s bullish assumptions.

Nevertheless, Chemring has been steadily growing earnings since at least 2019. It also works in a happy sector with a positive outlook. Therefore, the stock appears worthy of further research and consideration for potential inclusion in a long-term focused, diversified portfolio.

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