Babcock International Group Share Price Forecast December 2021 – Time to Buy BAB?

Shares of British aerospace, defence and nuclear engineering services company Babcock (LSE: BAB) are in the green today, closing at £316.6p as of December 22^nd (17:50 GMT). While the company has experienced its own set of problems in recent years, it has recently released its half-year results which have aimed to shed light on the current financial situation of the company.

Babcock International Group – Technical Analysis

According to the financial statement released by Babcock International Group indicated that the market cap is at £1.555 billion with total assets worth £4.35 billion. Revenue for 2020 was at £4.18 billion with a profit margin of -40.74% compared to £4.42 billion in 2019.

Moving averages such as Exponential Moving Average (10)(308.4), Simple Moving Average (10)(308.2),  Exponential Moving Average (20)(309.5), Simple Moving Average (20)(307.0) and Exponential Moving Average (30)(312.3) are indicating a buy action. Oscillators such as Stochastic RSI Fast (3, 3, 14, 14)(80.8), Williams Percent Range (14)(−23.1),  Bull Bear Power(3.8) and Ultimate Oscillator (7, 14, 28)(53.6) are neutral.

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Recent Developments

Babcock is known as an UK-based international aerospace, defence, and security business and operates marine, naval, land, and aviation divisions. It has also entered other markets in Canada, Australasia, and South Africa. While aviation and defence spending is a lucrative market,  Babcock shares haven’t performed well.  Challenges such as accounting problems and leadership issues have led to a loss of investor confidence. However, a change of leadership and accounting reviews can start recovery.

Under the new leadership, Babcock has strengthened its strategy which has resulted in the sale of some of its business to streamline operations.  Based on its half-year results, the company seems to be on track to reach this goal. Revenue for the company has increased from £2054 million in the same period last year to £2,223 million, although these figures were restated after the accounting review.  While it recorded losses last year, it made an underlying profit of £115.3 million this year.

Babcock has also a strong contract backlog worth over £10 billion, especially linked to its maritime division.  It has also signed an agreement worth £3.5 billion with the UK’s Ministry of Defence. This deal will let Babcock continue their support spanning UK naval base operations at HMNB Clyde and HMNB Devonport, alongside UK submarine and surface ship fleet support. It is going on selling some of its smaller businesses that continue to help it save money and streamline. It has also recorded contract wins worth over £700 million in the half-year.

Should You Buy BAB Shares?

While most investors will be thrilled with the majority of Babcock’s half-year results, there are a couple of credible risks as well. Its forecasted full-year results cannot be achieved if supply chain issues exist and inflation rises. While it is on the right track, the company still has lots of work to do to streamline operations and continue growth. This is a tedious and time-consuming task that can affect Babcock’s performance as well as investor sentiment and returns.

Based on all these factors, Babcock shares are a risky prospect for any investors and thus you shouldn’t add them to your portfolio at the moment.  While the change of leadership in the company is a good sign, it still has a long way to go and macroeconomic issues to contend with too. It’s better to be on the sidelines and watch how the company tackles these problems in the near future.

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