Babcock International (BAB) AI Stock Analysis

• Market Cap: £4.31B
• Dividend Yield: 0.62%
• Average Volume (3M): 1.75M
• Price to Earnings (P/E): 22.2
• Beta (1Y): 1.39
• Revenue Growth: 3.34%
• EPS Growth: 481.76%
• Country: UK
• Employees: 28,343
• Sector: Industrials
• Sector Strength: 91
• Industry: Engineering & Construction
• EPS (TTM): 0.23
• Shares Outstanding: 505,596,600
• 10 Day Avg. Volume: 1,607,078
• 30 Day Avg. Volume: 1,752,882
• PEG Ratio: 1.48
• Price to Book (P/B): 8.27
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 18.65
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: £953.33
• Price Target Upside: 10.85% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 4

Babcock International receives a solid score of 74, driven by strong earnings call guidance and beneficial corporate events, despite some financial leverage concerns. The company’s technical indicators and fair valuation further support a positive outlook, while challenges in specific segments highlight areas for improvement.

Positive Factors

Contracts

Babcock announced it has secured a 5-year extension of its British Army vehicle, fleet support and soldier training contract, worth £1.0bn in revenues to the group.

Earnings

Babcock has shown a 5% increase in operating profit compared to consensus estimates, indicating improvement in the company's financial performance.

Financial Performance

The company achieved a free cash flow that is 18% ahead of consensus, highlighting strong financial management and liquidity.

Negative Factors

Margins

The switch to the new contract from April 2025 will likely come with a limited impact on Land margins.

Market Uncertainty

The announcement comes whilst the UK Strategic Defense Review is still underway.

Babcock International Business Overview & Revenue Model

Company Description

Babcock International Group PLC is a leading British aerospace, defence, and nuclear engineering services company. The company operates in several key sectors, including marine, land, aviation, and nuclear, providing a wide range of services such as engineering support, project management, and technical training. Babcock is known for its role in supporting critical national infrastructure and delivering essential services to government and commercial clients worldwide.

How the Company Makes Money

Babcock International generates revenue primarily through long-term contracts with government and commercial clients, focusing on providing engineering support and project management services. The company's key revenue streams include the design, construction, maintenance, and decommissioning of naval ships and submarines, as well as providing technical training and support services for military and civil aviation. Additionally, Babcock earns income from its nuclear segment, which involves delivering nuclear engineering services and managing nuclear facilities. Significant partnerships with defense ministries, armed forces, and other governmental bodies contribute to its earnings, ensuring a stable and consistent revenue flow.

Babcock International Financial Statement Overview

Summary

Babcock International is showing signs of financial recovery with improvements in profitability and cash flow, but faces challenges with revenue growth and high leverage. While operational efficiency is moderate, the company's balance sheet indicates potential financial risks due to high debt levels. Strong cash flow generation provides a cushion, but future growth and stability will depend on reducing leverage and sustaining revenue growth.

Income Statement

Babcock International shows a mixed performance on its income statement. The company has improved its net profit margin from a negative to a positive 3.77% over the past year, indicating a recovery from previous losses. Revenue growth was slightly negative at -1.05%, suggesting a need for stronger top-line growth to sustain profitability. The EBIT and EBITDA margins stand at 5.50% and 8.62% respectively, showing moderate operational efficiency. The gross profit margin is relatively low at 5.63%, which may impact overall profitability.

Balance Sheet

The balance sheet indicates high leverage with a debt-to-equity ratio of 2.57, suggesting potential financial risk. However, there has been a slight improvement in stockholders' equity over the year. Return on equity has improved to 42.60%, mainly due to the increase in net income, though the equity base remains small. The equity ratio of 10.86% implies a low proportion of equity financing, which may be concerning for investors.

Cash Flow

Cash flow analysis reveals a strong free cash flow growth rate of 18.91%, highlighting effective cash management. The operating cash flow to net income ratio is 1.90, indicating that the company is generating solid cash flow relative to its net income. The free cash flow to net income ratio is 1.04, suggesting adequate conversion of profits into cash. These metrics demonstrate a healthy cash flow position.

Breakdown
TTM	Mar 2024	Mar 2023	Mar 2022	Mar 2021	Mar 2020
Income Statement		Total Revenue
4.62B	4.39B	4.44B	4.10B	3.97B	4.42B
	Gross Profit
286.80M	247.20M	833.60M	886.30M	270.40M	513.60M
	EBIT
284.70M	241.60M	151.00M	237.70M	-56.60M	179.90M
	EBITDA
391.10M	378.70M	249.30M	439.80M	-1.44B	220.30M
	Net Income Common Stockholders
192.50M	165.70M	-35.00M	164.20M	-1.80B	-117.80M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
575.00M	575.00M	456.00M	1.16B	913.00M	1.97B
	Total Assets
3.58B	3.58B	3.31B	4.60B	4.61B	7.79B
	Total Debt
998.00M	998.00M	1.02B	2.15B	2.32B	3.73B
	Net Debt
427.40M	427.40M	565.10M	998.90M	1.42B	1.88B
	Total Liabilities
3.17B	3.17B	2.94B	3.90B	4.38B	5.47B
	Stockholders Equity
388.90M	388.90M	353.90M	682.00M	213.00M	2.30B
Cash Flow		Free Cash Flow
227.00M	172.30M	144.90M	-154.80M	287.70M	133.00M
	Operating Cash Flow
331.10M	314.70M	270.00M	48.40M	464.20M	353.30M
	Investing Cash Flow
-98.20M	-100.60M	74.80M	297.00M	-61.20M	2.60M
	Financing Cash Flow
-93.50M	-85.50M	-666.10M	-122.70M	-1.22B	727.70M

Babcock International Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 860.00
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GB:BAB, the sentiment is Positive. The current price of 860 is above the 20-day moving average (MA) of 825.90, above the 50-day MA of 763.09, and above the 200-day MA of 580.57, indicating a bullish trend. The MACD of 29.31 indicates Positive momentum. The RSI at 68.21 is Neutral, neither overbought nor oversold. The STOCH value of 62.40 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for GB:BAB.

Babcock International Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SMIN	78 Outperform	£6.83B	22.96	13.99%	2.16%	6.10%	33.05%
BAB	74 Outperform	£4.31B	22.15	44.03%	0.62%	3.34%	481.76%
BA	74 Outperform	$52.16B	27.37	17.85%	1.74%	14.01%	6.03%
RR	72 Outperform	$69.38B	26.93		0.71%	14.70%	3.76%
AVON	68 Neutral	£460.99M	195.96	1.82%	1.20%	9.11%	―
Sector *	64 Neutral	$4.44B	11.99	5.16%	249.23%	4.01%	-11.87%

Babcock International Corporate Events

Babcock International Reports Strong FY25 Performance and Strategic Contract Wins

Babcock International Group PLC reported a robust financial performance for the fiscal year ending March 2025, with revenue reaching £4.83 billion, driven by an 11% organic growth. The company achieved a 17% increase in underlying operating profit to £363 million, alongside a significant reduction in net debt. Key contract wins, including a €800 million military air training deal with France and a £1 billion extension for military land equipment support with the British Army, underscore Babcock’s strategic positioning and growth momentum. The company’s efforts to de-risk its pension schemes further strengthen its financial stability, with reduced annual deficit repair payments anticipated over the next six years.

Spark’s Take on GB:BAB Stock

According to Spark, TipRanks’ AI Analyst, GB:BAB is a Outperform.

Babcock International receives a solid score of 74, driven by strong earnings call guidance and beneficial corporate events, despite some financial leverage concerns. The company’s technical indicators and fair valuation further support a positive outlook, while challenges in specific segments highlight areas for improvement.

To see Spark’s full report on GB:BAB stock, click here.

Babcock Secures £1 Billion Contract Extension with UK Ministry of Defence

Babcock International has secured a five-year contract extension worth around £1.0 billion with the UK Ministry of Defence, reinforcing its strategic partnership with the British Army. This extension will enhance Babcock’s support capabilities, improve army readiness, and contribute to the Defence Industrial Strategy, while also sustaining over 1,600 jobs across the UK.

Babcock International: Change in Major Holdings by Cobas Asset Management

Babcock International Group PLC has announced a change in the voting rights held by Cobas Asset Management, an investment firm based in Madrid, Spain. The firm has reduced its stake in Babcock’s voting rights from 3.007670% to 2.930967%, as of February 6, 2025. This change may influence the company’s shareholder dynamics and decision-making processes, potentially affecting its strategic direction.

Babcock International Upgrades Revenue Expectations Amid Strong Growth and New Contracts

Babcock International has reported strong trading performance for the first nine months of the financial year, leading to an upgrade in their full-year revenue and profit expectations. The company anticipates revenue of approximately £4.9 billion, driven by double-digit growth in Nuclear and Marine sectors. Key projects include increased nuclear decommissioning work, submarine support, and the Skynet program. Additionally, Babcock has secured a significant 17-year contract, worth up to €800 million, to provide military air training solutions for the French Armed Forces, marking an expansion of its military activities in France.