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Share Centre stock of the week: Babcock International

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Written by:
30/11/2015
Graham Spooner, investment research analyst at The Share Centre, picks Babcock International as stock of the week.

A FTSE-100 listed engineering support services company, Babcock International provides outsourcing services to government and private sector customers and works extensively with the UK armed forces.

Babcock has a diversified product base with a large international presence, and in the long term there are growing hopes for more opportunities in the nuclear area. Management are keen to highlight its links to the navy and long term contracts, alongside new markets, potential for more outsourcing and a recovery in certain areas of defence spending.

Investors should be aware that interim results in November reported a 7% rise in profits to £146.3m, on the back of a 5% increase in revenue to £2.04bn. The dividend was raised by 10% to 6.05 pence. Full year results are expected to be in line with expectations.

The group expect to benefit from the new defence spending review, potentially adding to an already strong order book.. The shares now trade on around 13.2 times 2017 earnings, offering an improving dividend, along with solid growth prospects. We remain happy to suggest investors buy for the long-term.

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