BAE Systems PLC (LSE:BA.) shares look fully valued despite growing global defence spending, Shore Capital analysts believe.
A ‘hold’ rating was reiterated for the FTSE 100-listed defence firm as a result, despite BAE’s own view that strong momentum would continue as arms spending increases.
US politicians recently passed a US$61 billion supplemental aid package for Ukraine while the UK plans to increase defence spending to 2.5% of gross domestic product.
“BAE Systems is a well-managed company with exposure to global defence markets, which have structural tailwinds,” analysts said in a note.
“That said, we do believe the shares are fully valued and see more value in other constituents of the sectors.”
According to Shore Cap, BAE is trading on a price-to-earnings ratio of 18 times, while its enterprise value to earnings before interest, tax, and amortisation at 13.4 times.
Analysts added the enterprise value to earnings rating implies a future value of 1,336p - 4% below Thursday’s closing share price.