Cohort (LSE:CHRT) has been one of the UK’s top-performing stocks of 2026 – so far. Shares are up 43.59% since the start of the year.
I identified this as a potential opportunity back in December. So after a substantial rally, is there still a chance to buy the stock?
What does Cohort do?
Cohort operates in the defence industry. It doesn’t make boats or aircraft, but it makes the things that go on them.
That includes things like sonar systems, missile launchers, and communication systems. And it’s a good time to be in that industry.
These are essential parts of military equipment and defence spending is on the up. So the outlook seems pretty promising.
Despite this, Cohort shares fell around 42% in the second half of 2025. The main reason was that margins declined significantly.
In the six months to the end of October 2025, revenues increased 9%, but earnings per share were down 19%. And the stock fell as a result.
My view was that this was a short-term issue. The stock has certainly done well since the start of the year, but was my thesis right?
Margin expansion
Cohort’s latest update indicates that margins are indeed progressing. Its net margin for the full year is expected to be 11.9%.
That’s a significant improvement on 2025’s 10.2%. And it might be a key part of why the stock responded well to the update.
I’m not surprised to see Cohort’s margins improving. Its profitability depends a bit on where it is in the product development cycle.
Back in December, the firm stated that it expected a return to more profitable early-stage work in 2026. And that might well be what’s happening.
There is, however, still some weakness in the Sensors and Effectors division. Management noted that margins here are below medium-term targets.
The question now, is whether that’s enough to mean the stock is still one to consider. Or has the opportunity passed?
Is there still an opportunity?
I think Cohort can continue to do well. But there’s a key difference between now and where the stock was at the start of the year.
Back in January, it was trading at a price-to-earnings (P/E) multiple of 22.4. That’s actually unusually low for the business.
Source: Fiscal.ai
Fast-forward to today and things are different. The stock now trades at a P/E multiple of 31.4, which is obviously quite a bit higher.
That means an important part of my thesis – the stock being unusually cheap – has changed. And that makes me a bit more wary.
The current multiple doesn’t fully reflect the latest results. For that, investors will need to wait for the annual report in July.
That should also give more detail around expanding margins. So I’ll be looking carefully when that information becomes available.
Finding investment opportunities
Shares in companies in growing industries that are dealing with short-term challenges can be great investments. And that’s what I look for.
At the start of the year, Cohort was in that position. Whether or not it is right now is less clear.
Fortunately, there are some other stocks I’ve got my eye on at the moment. And that’s what I’m focusing on with my investing.
Should you invest £5,000 in Cohort Plc right now?
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Stephen Wright does not own shares in any of the companies mentioned.
