BAE Systems‘ (LSE:BA.) share price has been one of the FTSE 100‘s great success stories of the last five years.
The defence giant’s climbed 238% since July 2021, turning a £5,000 initial investment into roughly £16,900 today. Yet over the last 12 months, the stock’s gone almost nowhere despite a world that feels increasingly less safe.
So is the gravy train stuck in the sidings? Or is this simply a red-signal pause before the next drive higher?
What the latest numbers say
Despite the recent lack of movement from BAE shares, its most recent trading update makes for impressive reading. The defence giant delivered a strong start to the year across all of its divisions, with management reiterating its full-year targets of 7%-9% revenue growth and 9%-11% underlying earnings growth.
Digging a little deeper reveals that the group’s enjoying a steady stream of new orders arriving at pace. In just the first few months of 2026, BAE secured a £2.5bn contract to support Türkiye’s recently ordered Eurofighter Typhoon fleet.
At the same time, another £1.1bn of MBDA air defence orders landed from European customers, alongside a further $325m order under a restricted US national space programme.
That’s a remarkable streak of major contracts landing in quick succession. And it reflects the emerging reality that governments around the world are significantly ramping up their defence spending programmes.
So with more outlay expected on the horizon, how much could a £5,000 investment today realistically grow into by this time next year?
Looking at the latest share price forecasts from institutional analysts, the average consensus seems to be around £6,375. That’s a 27.5% return vastly outperforming the stock market’s 8% average.
However, as experienced investors know, no forecast is ever set in stone. So the question investors need to keep in mind is…
What could go wrong?
Despite all the positive momentum, the flat share price performance over the last 12 months highlights an important dynamic at play.
A lot of the good news, like rising NATO budgets, strong order books, and geopolitical tailwinds, has already been baked into the valuation. And with a price-to-earnings ratio of over 27 times, it’s clear investors are anticipating BAE to continue signing more substantial contracts in the coming years.
Obviously, that isn’t guaranteed. While BAE’s heavily integrated with countless existing defence programmes, the firm still has to fiercely compete with other defence primes for new initiatives. And if supply chain disruptions or other operational spanners start getting stuck in the mechanics, the business could struggle to keep up with expectations.
To buy or not to buy?
BAE will publish its next set of results later this month, and investors will understandably be watching closely to see whether their bullish conviction’s well founded. Personally, I remain quite optimistic.
The business has plenty of challenges ahead. But with an impressive multi-decade track record of navigating defence spending cycles, BAE shares could be worth considering, especially if the group’s upcoming results continue to show impressive operational momentum.
Should you invest £5,000 in BAE Systems right now?
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Zaven Boyrazian does not hold any positions in the companies mentioned.
