Proactive Investors - BAE Systems (LON:BAES) shares could well be fully valued already despite growing global defence spending, Shore Capital analysts have said.
A ‘hold’ rating was reiterated for the FTSE 100-listed defence firm as a result, despite BAE’s own view that strong momentum would continue on growing arms spending.
This includes from a recent US$61 billion supplemental aid package for Ukraine in the US, alongside UK plans to increase defence spending to 2.5% of gross domestic product.
“BAE Systems is a well-managed company with exposure to global defence markets, which have structural tailwinds,” analysts said in a note.
“That said, we do believe the shares are fully valued and see more value in other constituents of the sectors.”
According to Shore Cap, BAE is trading on a price-to-earnings ratio of 18 times, while its enterprise value to earnings before interest, tax, and amortisation is at 13.4 times.
Analysts added the enterprise value to earnings rating could become “undemanding” by next year, implying a future value of 1,336p - down 4% on Thursday’s closing share price.