Meggit Share Price Forecast August 2021 – Time to Buy MGGT?

Shares of British aerospace company Meggit (LSE: MGGT) are experiencing a 56.04% increase, currently valued at £732.0 (August 02 11:54 UTC+1). This performance comes after the company confirmed it was being taken over by U.S. rival Parker Hannifin in a £7.1 billion deal. The bid came after the company reported £49 million pre-tax profits on revenue of £680 million.

Meggit – Technical Analysis

The financial statement from Meggit reveals that the market cap of the company is £3.647 billion, with total assets worth £3.998 billion and total liabilities worth £951.6 million. Revenue for 2020 was at £1.68 billion with a profit margin of -18.66%. This was a stark decline from 2019’s revenue of £2.28 billion.  The debt to assets percentage for the company is at 49.16% for 2020.

Oscillators for Meggit such as Stochastic %K (14, 3, 3(86.7), Commodity Channel Index (20)(573.4),  Average Directional Index (14)(31.0) and Awesome Oscillator(55.5) are pointing towards neutral. Moving averages such as Exponential Moving Average (100)(463.4), Simple Moving Average (100)(476.2), Exponential Moving Average (200)(444.2) and Simple Moving Average (200)(439.8) are pointing towards buying.

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Recent Developments

Meggitt has reported £33.6 million as first-half profit which is a huge increase from a loss of £368.4 million the previous year. The company’s prior performance was severely impacted by the losses and other asset write-downs due to the Covid-19 pandemic. Underlying profit before tax was at £48.4 million, which is less than 42% compared to £85.5 million the previous year. Although the company has been negatively affected by the decrease in civil aviation owing to the pandemic, results from the second quarter reflected improvement.

U.S. maker of industrial motion control systems Parker-Hannifin Corp. agreed on a £6.3 billion acquisition in cash to position itself better in the rebounding aerospace industry. MGGT shares surged after the company announced that they would recommend an 800 pence-per-share offer, which is 71% above the closing price on Friday. The acquisition is just the latest in a series of buyouts of U.K. aerospace and defence firms by U.S. suitors.

As part of the acquisition, Parker has signed legally binding commitments which will allow Meggit to keep its headquarters in the U.K, protect jobs and continue to meet its contractual obligations to the U.K.  government. The company will also pursue to meet existing targets of net carbon emissions, which need to be halved by 2025. Meggitt is also on track to achieve net-zero greenhouse gas emissions by 2050, across all its existing outlets and businesses.

Should you Buy MGGT Shares?

Before taking the decision on whether or not to pick up MGGT shares, investors should consider some important statistics. One of the best metrics of how investors view a company is its earnings per share. In Meggitt’s case, its earnings per share fell below zero in the previous year. This may be transitory in nature, but many investors consider it a negative and do not expect the share price to rise in the near future.

An encouraging sign is that Meggit shareholders received a 57% shareholder return in 2020, despite the company dropping 26%. This is way above the average shareholder returns received in the last 5 years, which was at 7%. Overall, as the recent corporate mood is starting to improve and the shares reach high price momentum, investors may want to consider keeping an eye on it lest they miss out on a bargain deal. The acquisition also marks a big bet move on civil aviation

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