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Investing.com - Kepler Cheuvreux upgraded QinetiQ Group (LON:QQ) stock rating from Hold to Buy on Monday, while slightly lowering its price target to GBP5.20 from GBP5.30. The stock has gained nearly 15% year-to-date according to InvestingPro data, currently trading at $23.40.
The defense technology company has experienced soft trends in its core UK, US, and Australian markets year-to-date, prompting operational restructuring measures to maintain profitability. Despite these challenges, QinetiQ maintains a "Fair" overall financial health score of 1.97 according to InvestingPro analysis.
QinetiQ is implementing a combination of asset disposals and workforce reductions, resulting in exceptional costs exceeding GBP20 million this year, while maintaining its underlying EBIT margin target just above 11%. The company’s current gross profit margin stands at 11.87% for the last twelve months.
The company’s ongoing share buyback program is reducing outstanding shares faster than anticipated, which Kepler Cheuvreux notes is contributing to modest adjustments in its financial outlook. With a market capitalization of approximately $3 billion, QinetiQ continues to generate positive levered free cash flow of $164.75 million.
The stock has fallen to the lower end of its historic PE band at 13x, which the research firm suggests may represent value despite QinetiQ’s recent volatility and exposure to AUKUS markets facing fiscal constraints. InvestingPro analysis indicates QinetiQ is currently undervalued with an EV/EBITDA ratio of 10.37x and offers a dividend yield of 2.37%, with dividend growth of 10.07% in the last twelve months.
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