BAE Systems (LSE:BA.) Wins Brazil Naval Gun Order, Is The Stock Still Cheap?

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BAE Systems (LSE:BA.) has secured a new contract to supply two Bofors 40Mk4 naval gun systems to the Brazilian Navy, putting fresh attention on how this kind of order feeds into the wider stock story.

See our latest analysis for BAE Systems.

Recent contracts in Brazil and Korea, alongside new air combat and helmet technologies, have arrived during a period where BAE Systems’ short term momentum has picked up, with a 7 day share price return of 6.12%. The 5 year total shareholder return of 291.03% shows how powerful the longer term compounding has been.

If the recent defence wins have you thinking about where else capital could work hard, this is a good moment to scan 36 power grid technology and infrastructure stocks

After a sharp 7 day move and a strong multi year record, the question for BAE Systems now is whether today’s valuation still offers a skew that rewards new risk, or mainly protects gains already made.

Most Popular Narrative: 17.2% Undervalued

BAE Systems last closed at £19.24, while the most followed fair value narrative sits at £23.23, framing the current contract news against a higher implied value.

The company’s order backlog has surged to £75 billion, with a pipeline of new opportunities partly fueled by higher defense spending commitments across NATO, the US, UK, Europe, and Indo-Pacific (for example, the UK targeting 3.5% of GDP on defense by 2035, and Japan doubling spending by 2027). This provides visibility on future revenues and supports the outlook for topline growth over multiple years.

Read the complete narrative.

There is a detailed growth story sitting behind that £23.23 figure. It leans on steady revenue expansion, firmer margins, and a richer future earnings multiple than today. Curious which assumptions really move the dial in this fair value model and how they tie back to the defence backlog and new programmes? The full narrative lays those building blocks out in black and white.

Result: Fair Value of £23.23 (UNDERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, this BAE Systems narrative could be knocked off course if major government programmes are cut or if ESG pressure significantly reduces investor appetite.

Find out about the key risks to this BAE Systems narrative.

Next Steps

If this BAE Systems story sounds compelling, now is a good time to check the numbers yourself and stress test the optimism. To see what is driving the brighter outlook, take a closer look at the 3 key rewards

Looking for more ideas beyond BAE Systems?

Do not stop with one defence stock. Broaden your watchlist with a few focused sets of ideas that could sharpen how you put capital to work.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include BA.L.

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