BAE Systems doesn’t even offer the consolation of a generous income. The trailing dividend yield is a modest 1.88%. So what’s gone wrong?

If anything, it’s a victim of its own success. Over five years, the shares are up a staggering 240%. Profits and revenues have climbed steadily as the West rearms. As a result, the shares look expensive. Even today, the price-to-earnings ratio is 25, well above the average FTSE 100 P/E of 16.5.

Why has this FTSE 100 stock slowed?

Profits certainly aren’t the problem as this list shows:

• 2025 – £2.15bn
• 2024 – £1.96bn
• 2023 – £1.94bn
• 2022 – £1.66bn
• 2021 – £1.91bn

That 2022 dip was primarily down to post-pandemic supply chain disruptions, rising inflation, and energy costs. 2025 was notably strong with record global defence spend driving sales to a record £30.7bn. The order backlog rose yet again to £83.6bn, giving BAE Systems massive earnings visibility. No stock climbs in a smooth upward line. Even one as solid as this.

I think the recent slowdown offers an opportunity for long-term investors who want to increase their exposure to the defence sector. Although I wouldn’t call BAE a bargain today.

So what do the experts say?

I’ve been poring over broker forecasts, and the 13 analysts offering one-year share price forecasts produce a consensus target of 2,306p. If correct, and these are only educated guesses, that would see the shares climb 19% from today’s 1,938p. Throw in the forecast yield of just under 2%, and the total forward return is 21%. Which would turn a £10,000 investment into a pretty handy £12,100. If it happens.

The most optimistic analyst is forecasting a share price of 2,600p in July 2027. That would turn £10k into £13,600, including the dividend. Personally, I’d never presume to second-guess where share prices are growing, but I would say this. If it did hit 2,600p, BAE Systems would be good for it. I’m highly optimistic about the long-term outlook for this stock, but investors must expect the usual ups and downs along the way.

Analysts stock ratings are promising too. Seven out of 13 label it a Strong Buy. Just one suggests selling.

• Strong Buy: 7
• Buy: 0
• Hold: 5
• Sell: 1
• Strong Sell: 0

Naturally, there are risks. Defence manufacturers rely on long-dated government defence contracts, which can be prone to delays, cost saving measures, and policy shifts. European governments may struggle to live up to their defence commitments.

Also, investors have made big profits and may decide to bank them if the outlook dims even slightly. Technical issues with expensive kit can cause all sorts of problems. But in our uncertain world, I still think BAE Systems shares remain well worth considering today.

ArticlePitch_InvestOneThousand]

Harvey Jones owns shares in BAE Systems.

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The catalyst was new PM Andy Burnham’s pick for Chancellor of the Exchequer, John Healey. He quit as defence minister last month after a row over military spending.

Therefore, his appointment is being interpreted as a bullish signal for future defence spending. Let’s unpack what’s going on here.

The backdrop

As a reminder, Healey was pretty scathing in his resignation letter. He wrote that the previous government was “unwilling to commit the resources that the nation needs to defend the country at this time of rising threats“. Ouch.

While Starmer had agreed to a NATO commitment to reach 3.5% of GDP on defence by 2035, Healey argued that to realistically hit that Britain needed an interim target of 3% of GDP by 2030. This is what most European allies are doing.

But he said the new Defence Investment Plan fell short of this, implying just 2.68% spend by 2030, up marginally from 2.6% in 2027.

Why the stock divergence?

Essentially, Healey argues that the additional spending should be frontloaded to address immediate threats from Russia. And with him now in a position to influence things, the stock market is responding in kind.

As mentioned though, Babcock is up a lot more than BAE. This is because it would likely benefit more from quicker UK defence spending. Over 70% of the firm’s revenue last year came from the UK, versus just 28% for BAE.

However, this is one reason why I prefer and have money in BAE — it has far more geographic diversification. In particular, the defence giant sources a significant proportion of sales (almost half) from the US, where the military budget seems set to go through the roof, at least if Donald Trump gets his way.

In contrast, less than 5% of Babcock’s sales were from North America last year.

BAE also has a higher dividend yield, at 2.2% against Babcock’s 1.2%. And while the stock’s forward price-to-earnings (P/E) ratio of 21 is higher than Babcock’s 16, this reflects a much larger order backlog and superior operating margins.

Mega-projects

In other news today, it was announced that Canada will join the Global Combat Air Programme (GCAP) as an observer nation. This could be a stepping stone for it to join the three founding members (UK, Italy, Japan) that are building a next-generation stealth fighter jet.

Rolls-Royce sees this new jet as having greater export potential than the Eurofighter Typhoon. These are the sort of mega-projects that BAE is involved in, which is another reason I’m bullish on the stock long term.

Is Babcock worth a look?

Both stocks could pull back sharply if there’s any whiff that higher UK and European military spending is in jeopardy.

Also, as a BAE shareholder, there’s the strange ethical situation of wanting the war in Ukraine to end while acknowledging this could cause a short-term dip in the stock price. I appreciate defence stocks are not for everyone.

That said, I don’t think an end to the Ukraine war would undo the multi-decade government commitments that underpin the company’s real value. 

So I think BAE, and potentially also Babcock, could be worth considering buying today. 

What income stock do we like better than BAE Systems right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Ben McPoland owns shares in BAE Systems and Rolls-Royce.

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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?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BAE Systems made the list?

Zaven Boyrazian does not hold any positions in the companies mentioned.

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Is there an opportunity to consider here? Let’s take a look at City analysts’ 12-month price targets for clues.

Price forecasts for BAE Systems

Analysts are generally bullish on BAE Systems, despite the fact that the shares are up nearly 250% over the last five years. Of the 21 brokers covering the name, 13 see it as a Buy or Strong Buy.

At present, the average price target is 2,295p – roughly 25% above the current share price. If that price forecast was to come to fruition, £5,000 invested in the shares today could be worth around £6,250 in a year’s time and that’s before dividend payments.

Do the numbers stack up?

Is that consensus price target realistic? I think so, but it may be a little bit optimistic.

For 2027, analysts expect the defence company to generate earnings per share of 94.7p. So for the share price to hit 2,295p, the forward-looking price-to-earnings (P/E) ratio would have to rise to 24, assuming that forecast is accurate.

Now, we could see that kind of earnings multiple if geopolitical uncertainty is high next year. In this scenario, investors might be willing to pay a hefty premium for defence shares.

However, if geopolitical tensions ease, we might be looking at a lower P/E ratio of say, 20 to 22. Taking that 2027 earnings forecast of 94.7p, we get a price target of 1,894p at a multiple of 20 and 2,083p at 22.

Is there an investment opportunity here?

So, is there an opportunity at current prices? I believe so – I see the potential for attractive returns from the shares in the years ahead.

Even if geopolitical tensions ease, the backdrop for BAE Systems is likely to remain favourable since countries all over the world are ramping up their defence spending. Here in the UK, soon-to-be-ex-Prime Minister Keir Starmer just pledged to spend an extra £15bn to modernise Britain’s depleted armed forces.

Around the world, security threats continue to grow, leading governments to increase defence spending.
BAE Systems

Given this backdrop, the company’s earnings are expected to rise at a healthy rate. The earnings forecast for 2027, for example, is 14% higher than the forecast for 2026.

Note that there’s a dividend yield of around 2% too. So, if the shares were to rise 10% over the next year, total returns would be closer to 12%.

In terms of risks, supply chain costs are something to consider. If costs were to surge, BAE Systems’ earnings could come in below expectations.

Sentiment towards defence shares is another. We could see the defence premium dissipate if global tensions ease.

I like the risk/reward skew after the recent share price pullback, however. I believe the shares are worth considering for an ISA or SIPP.

Should you invest £5,000 in BAE Systems right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BAE Systems made the list?

Edward Sheldon does not hold any positions in the companies mentioned

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Sales are booming against the unfortunate backdrop of rising conflict and a changing geopolitical order. And the market’s expecting customer orders (and therefore BAE’s profits) to keep soaring. It’s why the stock now commands an enormous valuation — at today’s share price, its forward price-to-earnings (P/E) ratio is a lofty 25 times.

That’s miles above the 10-year average of 14-15. And it’s making me consider whether this could put the cap on further share price gains. But here’s the thing: City analysts think BAE Systems shares could rise another 17% over the next year. At this rate, a £9,999 investment in the company today would turn into £11,699 by July 2027.

But how realistic is this forecast?

Strength in depth

No share price target is ever guaranteed. Even experienced analysts can get their forecasts wrong when circumstances around a company or industry change. However, I think BAE Systems has a good chance of meeting — or even exceeding — current City expectations.

That 17% upside target (to £23.05 per share) is based on the opinions of 18 different analysts. That gives a broad and balanced picture of how City brokers think the company may perform.

That said, it’s never a good idea to rely solely on other people’s opinions when investing. So alongside considering those analyst forecasts, I’ve weighed up the key factors that could propel BAE Systems shares higher or hold it back. They include:

The bull case

• Accelerating defence spending among NATO countries.
• Successful innovation in growth areas like cybersecurity and space systems.
• Growing momentum in the US, the world’s largest defence market.
• Robust cash returns to shareholders via further share buybacks and dividend hikes.
• Further steady declines in net debt.

The bear case

• Cooling geopolitical tensions and reduced weapons demand.
• Rising labour and material costs that hit margins.
• Supply chain issues that cause production delays.
• Contract losses to US defence firms under an ‘America First’ policy.
• Currency volatility that reduces earnings from overseas regions.

Are BAE Systems shares a Buy?

Investing in any share’s a risk. And especially one that trades on an historically-high valuation like BAE Systems does. But, on balance, I think adding the company to an ISA or Self-Invested Personal Pension (SIPP) is worth serious consideration.

The FTSE 100 firm has a strong record of execution in a rapidly growing industry. As such, it’s in great shape (in my view) to achieve the 7%-9% annual sales growth its targeting over the next few years. This, in turn, could propel BAE’s share price to new heights.

A £9,999 investment in BAE Systems shares five years ago would be worth £35,697 today. I’m optimistic the company can continue delivering those sorts of excellent returns given the current health of the defence industry.

Should you invest £5,000 in BAE Systems right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BAE Systems made the list?

Royston Wild does not hold any positions in the companies mentioned.

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The FTSE 100 defence stock has risen every year since, including a 52.2% gain in 2025. And with the dreadful war still grinding on, it’s up another 4.8% in 2026.

Add in the dividend, which jumped from 25.1p in 2022 to 36.3p last year, and this has been a tremendous investment for me.

However, I’m a little disappointed because BAE was trading above 2,300p back in March. Now, it’s slipped under 1,850p, and is even slightly underperforming the FTSE 100 year to date.

The question I’m asking myself now is, should I buy more shares? Or sell up?

Reassuring update

In May’s trading update, CEO Charles Woodburn reiterated full-year guidance for a 7%-9% rise in sales (from £30.7bn last year) and 9%-11% growth in underlying earnings per share (EPS).

In March, BAE signed a £2.5bn contract to provide training and support equipment for Türkiye’s Eurofighter Typhoons. And the UK government recently committed £8.6bn to the Global Combat Air Programme, which is the joint UK-Italy-Japan project to build the successor to the Typhoon.

By May, the defence giant had also completed £930m of its three-year £1.5bn share buyback programme. There are no balance sheet concerns.

Does the stock look cheap?

Looking ahead, the dividend appears well covered by expected earnings, with 9% and 11% growth pencilled in for 2026 and 2027, respectively. While the forward dividend yield is only 2.3%, and nothing is guaranteed, BAE has grown its annual payout for 22 consecutive years.

Turning to valuation, the stock looks quite attractive. Based on EPS forecasts for 2027, the forward-looking price-to-earnings (P/E) ratio is 19.4. That’s not far above the 10-year average forward P/E multiple of roughly 14.5.

Around the world, security threats continue to grow, leading governments to increase defence spending…We expect significant opportunities across our business, including space systems, missile and air defence systems, drones and counter drone technology, electronic warfare, combat aircraft, combat vehicles, frigates and submarines.
BAE Systems

Drone warfare

Last we heard, BAE’s multi-year order backlog had reached £83.6bn. Yet NATO spending is still expected to rise over the next decade, while the on-off Iran conflict is driving higher defence spending in the Gulf states, which are customers of BAE.

That said, the Iran and Ukraine conflicts have shown how swarms of cheap drones can cause havoc on traditional military hardware. Could low-cost autonomous weapons be prioritised over BAE-built tanks and legacy fighting vehicles?

It’s certainly possible. As Rafal Rohozinski, a senior fellow at the Centre for International Governance Innovation, pointed out recently in a Globe and Mail column: “The army NATO built to stop Soviet tanks is meeting a battlefield made transparent by $20 optics and ruled by hobbyist explosives.”

On the other hand, BAE is rapidly developing its own counter-drone products. In April, it secured a $180m contract from Sweden for its TRIDON Mk2 anti-aircraft system, which can engage drones.

Weighing things up, I think BAE’s worth considering for investors who don’t have ethical issues with defence stocks.

However, as it’s already one of my larger UK holdings, I’m going to hang fire until the firm’s half-year results on 30 July before plotting my next move.

What income stock do we like better than BAE Systems right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Ben McPoland owns shares in BAE Systems.

The post Should I buy more BAE Systems shares under 1,850p? appeared first on The Twelfth Magpie.

Both shares have had a decent run in the past month, with Reckitt in particular achieving notable growth. But most importantly, the current macro environment indicates favourable growth prospects for both companies.

Together, they could inject fresh life into a stagnant portfolio — albeit in very different ways.

Let’s take a closer look.

The defensive income pick

In the past, I typically viewed Reckitt as a relatively stable growth stock. But that narrative took a turn in the past few years, with the price down 23.6% since July 2021.

I now see it more as a moderately defensive income stock with global exposure. The company’s strong portfolio of essential, everyday products includes Dettol, Nurofen, Strepsils, and Harpic. It now derives over 40% of sales from emerging markets, with China and India delivering double‑digit growth.

In today’s ‘slower growth, higher uncertainty’ environment, strong brands matter: they tend to keep selling even when consumers are feeling strapped for cash.

At the same time, it faces the risk of sales disruption in regions like Russia and the Middle East, along with soft consumer sentiment and tough competition in Europe. 

Still, with such an attractive dividend policy, it’s worth a closer look. Since 2015, the yield has climbed steadily from below 2% to around 4.2%, putting it ahead of popular income gems like National Grid and Diageo.

The defence giant with growth potential

BAE has a more obvious growth-focused appeal right now: it sits at the centre of a structural, multi-year ‘defence supercycle’.

With several NATO countries boosting defence spending to 3.5% of GDP, the aerospace and defence giant enjoys clear, long-term earnings visibility. In the UK alone, over £15bn of extra funding has been directed to areas where BAE is the number one supplier.

But while defence spending is a necessary evil, the rise in global conflicts is regrettable. Notably, some of BAE’s global sales have drawn criticism from human rights watchdogs, which brings about reputational risk. This could impact the share price going forward, but more importantly, adds a moral consideration for investors.

The company currently has a record £84bn orderbook, multi-year government contracts and rapidly expanding exposure to next-generational technology. And while it doesn’t have the high yield of Reckitt, its 42-year-long dividend track record is undeniably impressive.

Long story, short: BAE looks set for decades of steady growth, making it an ideal consideration for a retirement-focused portfolio.

My final verdict?

Reckitt and BAE together offer a great mix of income and growth to a portfolio, so I’ll be looking at how I can shift funds into them this month.

But for investors considering them, bear in mind these are long-term considerations, with each facing short-term volatility risk.

For those of you seeking a more dividend-heavy stock to supercharge your income, I might have something even more appealing.

What income stock do we like better than Reckitt Benckiser Group Plc right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Mark Hartley owns shares in BAE Systems, Diageo, Reckitt Benckiser, and National Grid.

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Yet BAE Systems (LSE:BA.) has also performed strongly, surging 286% over this time, with rising dividends on top.

Both BAE and Rolls-Royce are benefitting from higher defence spending, and this is set to continue moving forward. But which one do I prefer today? Here’s where I’ve got my money.

A rising defence tide is lifting all boats

Rolls-Royce’s Defence division makes engines for military transport and patrol aircraft, as well as being the sole supplier of naval nuclear propulsion to the UK Ministry of Defence. Today, defence makes up around 23% of total revenue.

However, this unit has structurally lower margins than the engine maker’s other two divisions. In 2025, the operating margin here was 14.4% versus 20.5% for Civil Aerospace and 17.4% for Power Systems.

Rolls-Royce stock therefore offers investors exposure to rising defence spending, as well as international travel trends and power generation growth driven by data centres.

The firm also has its burgeoning small modular reactor (SMR) business, which has won contracts to build SMRs in the UK, Czech Republic, and most recently Sweden.

By contrast, BAE is a pure defence play, with operations spanning land, air, sea, space and cyber. The operating margin is lower at 10.3%, but the company’s order backlog reached £83.6bn last year, up from £69.8bn in 2023.

Both companies are involved in the Global Combat Air Programme (GCAP). This is the joint project between Britain, Italy and Japan to design and build a new stealth fighter jet.

Whereas a rival programme between France and Germany collapsed in June, the UK government has just committed £8.6bn over four years to GCAP.

We hold a significant share in the GCAP programme, which we believe will be a leading combat aircraft programme with significant export opportunity potentially larger than Eurofighter. GCAP production is expected to ramp up in the mid-2030s.
Rolls-Royce.

Risks to bear in mind

Some investors worry that government priorities are shifting from big defence projects like aircraft carriers and frigates to drone warfare. If so, that could be a long-term growth threat to BAE, whose share price is down 13% since March.

Meanwhile, Rolls-Royce’s SMR business will face fierce competition from GE Vernova Hitachi Nuclear Energy. Indeed, Poland-based SGE just announced plans to build 14 SMRs in the UK, using GE Vernova Hitachi’s BWRX-300 technology.

Rolls-Royce stock is also expensive, trading at almost 37 times forward earnings versus BAE’s 22.5. Therefore, a lot of future growth is already priced in, creating valuation risk were these expectations not to be met.

Which looks more attractive?

So, where do I have my money? In both, actually, as I’m bullish on Rolls-Royce’s longer-term growth opportunities beyond its present core operations.

These include:

• A total addressable market of 400+ SMRs.
• Advanced Modular Reactors (AMRs), which are more flexible powerplants with potential uses in defence power.
• Narrowbody aircraft.

As for BAE, it’s investing heavily in future technologies. These include electronic warfare, uncrewed and counter-drone systems, laser-guided weapons, and space solutions.

I’m holding both. But if I had to chose today, I think BAE looks better value, and is worth considering around £20.

Should you invest £5,000 in BAE Systems right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BAE Systems made the list?

Ben McPoland owns shares in BAE Systems and Rolls-Royce.

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Why do I rate Lloyds shares so highly?

My first pick is Lloyds Banking Group (LSE: LLOY). I think it’s a terrific portfolio building block. It offers investors both share price growth and dividend income potential, although like any stock, it’s not without risks.

Lloyds almost sank the UK economy during the financial crisis, and only survived after being bailed out to the tune of £20.3bn. At least taxpayers got their money back. Selling the government stake raised £21.2bn. But investors took a beating and Lloyds shares struggled for years. So I’m not getting too dewy-eyed here.

The company has exited its riskier operations and is now focused on the nuts and bolts of everyday personal and business banking. With luck, that should reduce future share price volatility. The downside is that the business may struggle to grow. Especially with smaller challenger banks snapping at its heels.

Despite that, it’s making a heap of money, as full-year profits show:

• 2025 – £6.7bn
• 2024 – £6.0bn
• 2023 – £7.5bn
• 2022 – £6.9bn
• 2021 – £6.9bn

But markets don’t just want to see big profits. They want to see those profits steadily increasing, and that may not always be possible, especially given the struggling UK economy. The Lloyds share price is up an impressive 145% over five years, although it might slow from here. With luck, the income should keep flowing. In the last three years, it has increased shareholder payouts by a generous 15%.

The stock is forecast to yield 3.74% this year, climbing to 4.4% in 2027. And it looks decent value, with a modest forward price-to-earnings (P/E) ratio of 11.5. It won’t always perform, but I think it’s worth considering for long-term investors.

Are BAE Systems share worth considering too?

My second buy-and-hold forever stock is FTSE 100 defence group BAE Systems (LSE: BA). I’m basing this pick on human nature. Sadly, humans may have evolved dramatically since the days when we first walked on two feet, but we remain a dangerous species. Now the West and Russia and China are facing off against each other again as in the Cold War. And we have to cope with Middle East uncertainty too.

Defence stocks have been the beneficiaries. The BAE Systems share price is up a staggering 268% over the last five years. However, it has been bumpy lately. Some investors will have banked their profits, and gone in search of the next big growth sector. Others may have decided the shares are too expensive, given the forward P/E of around 25. That’s understandable. Investing goes in cycles.

There are other risks. Cash-strapped Western governments may struggle to spend more on defence. Peace deals in Ukraine and Iran would be fantastic news for humanity, but a blow for BAE Systems shares. Sadly, another geopolitical threat would no doubt loom, making this another forever stock to consider.

Should you invest £5,000 in Lloyds Banking Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Lloyds Banking Group Plc made the list?

Harvey Jones owns shares in BAE Systems, HSBC Holdings, Lloyds Banking Group, M&G, Rolls-Royce and Scottish Mortgage Investment Trust.

The post These are my best FTSE 100 stocks to buy and hold forever appeared first on The Twelfth Magpie.

But this narrow focus on (hopefully) good news misses the far bigger story. NATO is now embarking on a dramatic, long-term expansion of defence spending that will run for at least the next decade. Estimates are that this will involve $2.7trn (£2trn) in extra annual spending through to 2035.

And BAE sits at the centre of the alliance’s core platforms, munitions, and next‑generation systems. So it is perfectly positioned to be one of the biggest beneficiaries of this long-term structural shift. I already own shares in the firm, but should I buy more on the current price dip?

Is the stock a bargain now?

The shares have fallen 20% since their 18 March one-year traded high of £23.59. This has only added to the considerable undervaluation I had noticed before.

As it stands, BAE is bottom of its competitor group on the key forward price-to-earnings ratio. I use the forward measure because I am interested in where the stock is going, not where it has been. 

It trades at just 23.6, against an average of 31.7. The group comprises L3Harris Technologies at 24.3, RTX at 31.4, TransDigm at 33.9, and Rolls-Royce at 37.4.

So, BAE Systems looks very cheap on this basis.

The same applies to its forward price-to-sales ratio of 1.6 — again bottom of its group, which averages 4.2. And BAE Systems also looks a bargain at its price-to-book ratio of 4.4 compared to the 16.4 average of its rivals.

How does the core momentum look?

However, a low valuation only matters if the business can keep growing strongly — with earnings being the key driver.

A risk here is any delay to BAE’s major programmes — particularly in munitions, air systems, and next‑generation platforms. These could temporarily pressure margins even as long‑term demand remains strong. Another is increasing supply‑chain constraints, which could slow BAE’s ability to convert its record order book into delivered revenue.

Nonetheless, analysts forecast the defence giant’s earnings will increase by a very robust annual average of 12% over the medium term at minimum.

The projection looks well supported by its 2025 results, released on 18 February this year. Underlying earnings before interest and tax jumped 12% to £3.3bn, lifting return on sales to 10.8%.

The robust numbers came from strong ongoing demand across air, maritime, electronic systems and combat vehicles. Indeed, order intake rose to £36.8bn, powering the order backlog to a record £83.6bn.

My investment view

For me, the recent pullback looks like a classic case of the market obsessing over short‑term geopolitical noise while ignoring a decade‑long structural tailwind.

This has left BAE trading at the bottom of its peer‑group valuations, despite its tremendous fundamentals. These include record orders, strongly rising earnings, and one of the most diversified operations across NATO’s rearmament programmes.

With long‑cycle demand effectively locked in, I see the current dip as an attractive opportunity to build my position further. For the same reasons, I think the stock extremely worthy of consideration by savvy, long-term investors.

Should you invest £5,000 in BAE Systems right now?

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And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BAE Systems made the list?

Simon Watkins owns shares in BAE Systems and Rolls-Royce.

The post Down 20% to below £19! Is now the right time for me to take advantage of BAE Systems’ bargain-basement share price? appeared first on The Twelfth Magpie.