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QinetiQ (GB:QQ)
LSE:QQ
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QinetiQ
(LSE:QQ)
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Rating:58Neutral
Price Target:
520.00p
▲(2.16% Upside)
Action:ReiteratedDate:11/15/25
QinetiQ's overall stock score is primarily influenced by its strong financial performance and positive earnings call, which highlight strategic wins and a robust order backlog. However, technical analysis indicates bearish momentum, and valuation concerns due to a negative P/E ratio weigh down the score. The company needs to address operational challenges to improve profitability and investor sentiment.
Positive Factors
High order backlog
A record GBP4.8bn backlog gives several years of revenue visibility, enabling capacity planning and smoothing revenue cyclicality. Large multi-year contracts reduce near-term reliance on spot wins, improving predictability of cash flows and supporting durable organic growth and program execution.
Strong cash conversion
High cash conversion (85%) and consistent positive operating/free cash flow provide reliable internal funding for reinvestment, dividends and buybacks. Durable cash generation lowers refinancing dependency and cushions the business against profit-to-cash timing differences in long defence programmes.
Strategic contract wins & extensions
Large programme extensions like the GBP1.5bn LTPA renewal reflect deep customer relationships and competitive positioning. Such secured, long-term contracts generate recurring work and follow-on support, strengthening margin mix and creating durable revenue streams tied to core capabilities.
Negative Factors
Revenue and profit deterioration
Declines in EBIT and net income with negative margins point to structural operational or cost issues. Persistent margin weakness reduces retained earnings and the capacity to fund investment from profits, making long-term margin recovery and sustainable free cash flow generation more challenging.
Rising debt and weakening equity ratio
An upward trend in total debt alongside a falling equity ratio signals weakening capital structure over time. Even with current manageable leverage, continued debt accumulation can limit financial flexibility, raise interest costs and constrain investment or bidding capacity in multi-year defence programmes.
Dependence on contract timing and regional awards
Exposure to government procurement timing and regional award outcomes causes structural revenue volatility; the Australian Land Systems loss and UK order delays show sensitivity to tender outcomes. This concentration heightens execution risk and can suppress organic growth for multiple quarters.
QinetiQ (QQ) vs. iShares MSCI United Kingdom ETF (EWC)
Market Cap
£2.66B
Dividend Yield2%
Average Volume (3M)1.20M
Price to Earnings (P/E)20.0
Beta (1Y)0.77
Revenue Growth-4.59%
EPS Growth-256.51%
CountryUK
Employees8,500
SectorIndustrials
Sector Strength72
IndustryAerospace & Defense
Share Statistics
EPS (TTM)0.13
Shares Outstanding527,093,300
10 Day Avg. Volume1,056,778
30 Day Avg. Volume1,195,703
Financial Highlights & Ratios
PEG Ratio0.05
Price to Book (P/B)3.47
Price to Sales (P/S)1.13
P/FCF Ratio19.34
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
£545.00Price Target Upside7.07% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
EPS Forecast (FY)0.31
Revenue Forecast (FY)£1.93B
QinetiQ Business Overview & Revenue Model
Company DescriptionQinetiQ Group plc operates as a science and engineering company primarily in the defense, security, and infrastructure markets in the United States, Australia, Europe, and internationally. The company operates through EMEA Services and Global Products segments. It offers advanced materials and manufacturing products; artificial intelligence, analytics, and advanced computing technologies; cyber and electromagnetic technologies; human protection and performance systems; novel systems, and weapons and effects; maritime platform, and system design and assessment products; power sources, and energy storage and distribution products; robotics and autonomy services; secure communications and navigation systems; and sensing, processing, and data fusion systems. The company also provides testing and evaluation, training and simulation, and cyber and digital resilience services, as well as unmanned air, land, and surface targets. It serves defense, aviation and aerospace, energy and utility, financial services, government, law enforcement, marine, space, and telecommunications sectors. The company was founded in 2001 and is based in Farnborough, the United Kingdom.
How the Company Makes MoneyQinetiQ generates revenue through a diversified business model primarily focused on government contracts and defense-related projects. The company's key revenue streams include long-term contracts with defense ministries, consultancy services for security assessments, and technology development projects. Additionally, QinetiQ earns income from sales of proprietary technologies and products. Significant partnerships with government entities and defense organizations enhance their contract opportunities, while the company's investment in research and innovation helps to secure ongoing projects and maintain competitiveness in the market. The company also benefits from collaborations with industry partners and other stakeholders to expand its capabilities and reach.
QinetiQ Earnings Call Summary
Earnings Call Date:Nov 13, 2025
(Q2-2026)
| % Change Since: |
Next Earnings Date:May 21, 2026
Earnings Call Sentiment Neutral
The earnings call highlighted a strong order backlog and successful restructuring efforts, particularly in the U.S. However, there were notable challenges, including revenue declines and market pressures in Australia and the U.K. The company remains confident in its long-term growth potential and maintained its full year guidance.Q2-2026 Updates
Positive Updates
Record Order Intake and Backlog
Order intake for the half was GBP 2.4 billion, driving a closing order backlog of GBP 4.8 billion, both reported records for the group.
Successful U.S. Restructuring
Achieved good progress on the U.S. restructuring program, including the disposal of the U.S. Fed IT business and significant headcount resizing.
Strategic Wins in EMEA
Secured GBP 1.5 billion extension for LTPA and a GBP 25 million contract to deliver collective training for the Royal Navy.
Strong Cash Conversion
Cash conversion remains strong at 85%, underpinning full year guidance of around 90%.
Solid Financial Performance
Despite a 3% revenue decline, the underlying margin of 10.7% was ahead of expectations, supporting the full year target of around 11%.
Negative Updates
Revenue Decline
Revenue was down 3% on an organic basis at GBP 900 million due to sale of Fed IT business and tough market conditions.
Market Challenges in Australia
Loss of the Land Systems work package under the MSP framework led to lower revenue in Australia.
Delays in U.K. Orders
Experienced delays to orders in the U.K., particularly in engineering services and R&D framework contracts.
U.S. Federal IT Market Impact
The year-on-year impact on the federal IT market was stark, leading to restructuring and disposal of the Fed IT business.
Company Guidance
In the recent call, the company provided a comprehensive overview of its fiscal performance and future outlook amidst challenging market conditions. Key metrics highlighted include a record order intake of GBP 2.4 billion and a closing order backlog of GBP 4.8 billion, although revenue saw a 3% organic decline to GBP 900 million. The book-to-bill ratio stood at 0.9x, reflecting delays in contract awards, particularly in the U.K. and Australia. Despite these challenges, underlying profit was GBP 96 million, with a margin of 10.7%, supporting a full-year margin target of around 11%. The company emphasized its strategic positioning with significant milestones, such as the GBP 1.5 billion extension of the LTPA contract and an enhanced EDP contract, underpinning long-term growth visibility. The company also reported strong cash conversion at 85% and a leverage ratio of 0.6x, with shareholder returns totaling GBP 101 million through dividends and a share buyback program. The guidance remains unchanged, projecting circa 3% organic growth on a like-for-like basis, with a continued focus on execution and capital discipline to navigate market headwinds and drive value creation for shareholders.QinetiQ Financial Statement Overview
Summary
QinetiQ demonstrates strong revenue growth and effective cash flow management, but recent profitability challenges reflected in negative margins indicate potential operational issues. The balance sheet is stable, yet the trajectory of increasing debt and decreasing equity ratio warrants attention. The company is positioned well within its industry, but the focus should be on improving operational efficiencies to enhance profitability.Income Statement
The company has shown a significant increase in revenue over the years, with a notable jump from 2022 to 2023. However, the most recent year saw a decline in EBIT and net income, resulting in negative margins. This indicates potential operational challenges or increased costs, impacting profitability.60
Neutral
Balance Sheet
The balance sheet reveals a stable equity base with increasing total debt. Despite the rise in debt, the company maintains a reasonable debt-to-equity ratio due to solid stockholders' equity. However, the declining equity ratio in recent years suggests a need for careful financial management to maintain stability.65
Positive
Cash Flow
The company's cash flow is robust, with consistent positive operating cash flow and free cash flow generation. The free cash flow growth rate has been variable, but overall cash management appears strong, providing a buffer against potential income statement volatility.70
Positive
| Breakdown | Mar 2025 | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 1.93B | 1.91B | 1.58B | 1.32B | 1.28B |
| Gross Profit | 1.93B | 268.70M | 480.50M | 416.40M | 431.80M |
| EBITDA | 26.20M | 292.90M | 226.70M | 176.60M | 205.60M |
| Net Income | -185.70M | 139.60M | 154.40M | 90.00M | 121.70M |
Balance Sheet | |||||
| Total Assets | 1.83B | 2.11B | 2.10B | 1.79B | 1.50B |
| Cash, Cash Equivalents and Short-Term Investments | 290.60M | 231.00M | 155.60M | 248.30M | 190.60M |
| Total Debt | 428.90M | 391.80M | 368.90M | 22.10M | 26.70M |
| Total Liabilities | 1.20B | 1.18B | 1.13B | 746.70M | 611.60M |
| Stockholders Equity | 626.50M | 926.10M | 968.30M | 1.04B | 884.60M |
Cash Flow | |||||
| Free Cash Flow | 112.50M | 146.80M | 97.00M | 106.40M | 102.10M |
| Operating Cash Flow | 221.30M | 243.10M | 206.00M | 190.70M | 178.00M |
| Investing Cash Flow | 400.00K | -99.10M | -464.40M | -83.60M | -49.60M |
| Financing Cash Flow | -158.40M | -63.20M | 159.70M | -50.40M | -55.60M |
QinetiQ Technical Analysis
Positive
509.00
Price Trends
491.35
Positive
469.55
Positive
482.30
Positive
Market Momentum
4.06
Positive
50.38
Neutral
42.96
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GB:QQ, the sentiment is Positive. The current price of 509 is above the 20-day moving average (MA) of 497.50, above the 50-day MA of 491.35, and above the 200-day MA of 482.30, indicating a bullish trend. The MACD of 4.06 indicates Positive momentum. The RSI at 50.38 is Neutral, neither overbought nor oversold. The STOCH value of 42.96 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for GB:QQ.
QinetiQ Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
71 Outperform | $64.73B | 24.91 | 17.90% | 1.99% | 11.60% | 8.03% | |
69 Neutral | £597.60M | 24.99 | 13.24% | 1.58% | 23.91% | -14.66% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
63 Neutral | £1.44B | 32.18 | 14.44% | 1.64% | -2.53% | 22.25% | |
58 Neutral | £2.66B | 20.00 | ― | 2.00% | -4.59% | -256.51% | |
53 Neutral | £557.23M | 79.43 | 6.27% | 1.02% | 10.74% | 237.07% | |
49 Neutral | £31.54M | -0.12 | ― | ― | ― | ― |
* Industrials Sector Average
GB:QQ
QinetiQ
509.00
24.29
5.01%
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GB:ALRT
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.