Got £1,000 for a Stocks and Shares ISA? I’d buy the BAE share price today

BAE Systems plc (LON: BA) could offer impressive growth potential at a reasonable price in my view.

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With ISA season now in full swing, a number of investors may be looking for shares that offer growth at a reasonable price. One such company appears to be FTSE 100-member BAE (LSE: BA). The defence stock has experienced a challenging period, but is nevertheless expected to post impressive profit growth in the current year.

Therefore, alongside another growth share which released results on Tuesday, now could be the time to buy it.

Improving prospects

The company in question is digital communications specialist Next Fifteen (LSE: NFC). Its 2019 results showed a rise in net revenue of 14% to £224.1m, while adjusted profit before tax increased by 23% to £36m. The company was able to deliver significant client wins during the period, while its net debt level has more than halved to just £5.2m.

It has continued to make progress in the delivery of its strategy. It anticipates that it could be in a strong position to add value to companies which struggle with the impact that technology is having on their own business models.

With Next Fifteen forecast to post a rise in earnings of 8% in the current year, it appears to be performing well. The world economy’s growth outlook remains relatively robust, while the investment it is making in its platform of businesses and products could help it to adapt to constant change in a number of key markets. As such, with a price-to-earnings (P/E) ratio of 15.6, it could offer investment potential for the long run.

Growth potential

As mentioned, the BAE share price has experienced a turbulent period in recent months. There are concerns regarding one of its largest customers, Saudi Arabia, with it being possible that the company may not be able to fully service demand from the country for its products as a result of geopolitical risks. While this uncertainty persists, the company’s shares could continue to lag a number of other defence stocks.

However, the result of its share price fall is a low valuation. It now trades on a P/E ratio of just 10.4, which suggests that it offers a wide margin of safety. It is due to post a rise in net profit of 8% in the current year, while further strong growth could be ahead over the long run. In fact, the global defence industry is expected to step up in its growth rate after a decade of slow growth. This could provide improved operating conditions for businesses across the sector.

While buying any stock during an uncertain period can mean additional risk, it may also equate to higher potential returns. Since BAE has a strong position in what is a fast-growing market, its long-term investment prospects appear to be bright. With bottom-line growth of 8% forecast for the current year, it could deliver improving share price performance in the coming years.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of BAE Systems. The Motley Fool UK has recommended Next Fifteen Communications. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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