Analyst David Farrell of Jefferies maintained a Buy rating on Chemring (CHG – Research Report), retaining the price target of p530.00.
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David Farrell’s rating is based on Chemring’s strategic acquisition of Landguard Nexus, which is expected to enhance its existing supply chain for electronic warfare products. The acquisition price of £14 million, which is twice the revenue, is considered reasonable, especially when compared to the valuation of Roke at four times sales. Although the acquisition may not significantly boost earnings per share in the first year due to initial investments, the margins are anticipated to improve to mid-teens over the medium term.
Additionally, Chemring’s recent $65 million contract with the US Department of Defense for testing equipment, running through to 2030, highlights the growing demand for even the less central parts of its portfolio. While the contract’s lack of obligated funds might initially limit backlog contributions, it underscores the company’s potential for future revenue growth. These factors collectively contribute to David Farrell’s Buy rating for Chemring’s stock.
According to TipRanks, Farrell is a 4-star analyst with an average return of 9.2% and a 59.29% success rate. Farrell covers the Industrials sector, focusing on stocks such as Chemring, Volution, and FLSmidth & Co. A/S.