With Stocks and Shares ISA users having a fresh £20,000 contribution limit to exploit for tax-free gains, here are four of my favourite cheap shares to consider.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Taylor Wimpey

Taylor Wimpey‘s shares have dropped 14% over the last month. As a consequence, its price-to-book (P/B) ratio has toppled to 0.9.

At below 1, the builder trades at a discount to its balance sheet assets. This figure’s also below the 10-year average of 1.4.

The Iran War has created fresh and significant threats for housebuilders. Interest rates are tipped to rise instead of fall, putting buyer affordability under pressure. But is this now baked into the valuations of these stocks? In the case of Taylor Wimpey, I think so.

Over time, I expect the FTSE 250 firm to recover strongly, driving by the rising housing needs of Britain’s soaring population.

ConvaTec

ConvaTec manufactures medical products like stoma bags and wound dressings, demand for which remains largely unaffected during downturns. So why has its share price dropped 9% during the month?

It comes down to market worries over higher transport and manufacturing costs as oil prices increase. Supply chain disruptions and their effect on raw material prices is another emerging problem. But at current prices, I believe the FTSE 100 firm’s worth a close look.

Its price-to-earnings growth (PEG) ratio is 0.3. Again, any reading below 1 is considered bargain-basement territory. I like ConvaTec’s leading positions in fast-growing markets, and think this will drive long-term earnings growth.

Babcock International

Babcock International (LSE:BAB) shares are down 7% over the last month. Not even defence stocks like this have been spared the broader stock market rout.

However, this isn’t because conditions have significantly worsened in the face of the Iran War. Indeed, defence contractors like this stand to gain from increased geopolitical uncertainty. They face increased costs and potential supply issues, but the outlook remains strong for them.

To my mind, Babcock stock has been a victim of its own recent success. The shares surged 95% in value over the past year, leaving the stock vulnerable to profit taking as investor nervousness has crept in.

I see this as a great dip-buying opportunity to think about. With a price-to-earnings (P/E) ratio of 22.2 times, the FTSE 100 firm’s still one of the defence industry’s cheapest stocks. I expect it to rebound in value as global weapons spending steadily climbs.

Safestore

Safestore shares have dropped 13% over a one-month horizon, reflecting worries over consumer spending as inflationary pressures increase. The self-storage company now offers all-round value.

The real estate investment trust (REIT’s) now trading on P/B and PEG ratios of 0.2 and 0.6 respectively. Dividend investors also have a lot to shout about, the dividend yield rising to above 5%.

I’m optimistic factors like steady expansion and limited industry supply will see Safestore shares rebound from current levels.

The post Love bargains? 4 stock market gems to consider this new ISA year appeared first on The Motley Fool UK.

Yet the Footsie’s drop also throws up considerable opportunities. Looking at the bigger picture, a huge number of UK blue-chip shares still appear to be on course to deliver exceptional price gains and dividends over the long haul. Snapping them up today could supercharge returns when stock markets eventually recover.

Here are just two FTSE 100 stocks I think could rebound spectacularly from current price levels.

Building back stronger?

Housebuilders like Persimmon (LSE:PSN) could be among the biggest casualties if interest rates rise. With the UK economy locked in low-growth mode, buyer affordability could take a double-whammy.

Building society Nationwide has warned that “UK economic growth is likely to be slower and inflation higher than previously expected“, with the Iran war “clouding the outlook“. No wonder Persimmon’s share price is down 26% over the last month, then.

Yet longer term, market conditions are likely to remain highly favourable for sector earnings. The government estimates at least 300,000 new homes are needed every year to house the booming population. As the UK’s second-largest builder by volume, Persimmon’s well placed to capitalise on this.

In the meantime, Persimmon’s focus on affordable housing could support earnings as buyers trade down in a tough market.

With a price-to-book (P/B) ratio of 0.9, Persimmon shares offer compelling value at today’s prices. That’s below the value watermark of one. It’s also miles below the company’s 10-year average of 1.8.

Too cheap to miss?

Babcock International (LSE:BAB) shares have fallen a sizeable 15% over the past month. Against the backdrop of an escalating war, seeing a defence stock like this reverse might be puzzling to some.

Not to me. Sure, the Middle East conflict threatens to impact supply chains and push up energy costs. But this isn’t the chief reason the company (like industry rival BAE Systems) is reversing. To my mind, it reflects Babcock’s previous huge share price gains and investors now booking profits to raise cash and/or invest in bargains.

In my view, the long-term outlook for the FTSE 100 firm remains as compelling as ever. NATO nations should continue rapidly rearming as the geopolitical landscape becomes bumpier. And especially as the President Trump fumes over other NATO nations not entering the war, raising fresh doubts over US military security in Europe. In this landscape, I expect the defense share to bounce back from its recent fall.

Babcock’s share price drop leaves the firm on a forward price-to-earnings (P/E) ratio of 18.5 times. So, once again, it looks like one of Europe’s best value defence shares — the broader P/E here remains high at 30-31. Like Persimmon, I think it’s a top FTSE 100 dip buy to consider.

The post Forget short-term pain! 2 FTSE 100 shares to consider for long-term gain appeared first on The Motley Fool UK.

Both look like obvious go-to stocks as Middle East tensions escalate further. Yet anyone expecting them to be flying right now will be in for a surprise. BAE Systems and Babcock have both slipped over the last week, in Babcock’s case by 7.5%. So what’s going on?

Booming FTSE 100 sector

It certainly isn’t because tensions are easing. The FTSE 100 is in correction territory having dropped more than 10% since Iran tensions exploded. It’s plunging today as energy infrastructure comes under threat, raising the risk of an oil price spike or even shortages. More countries risk being drawn into conflict. Yet defence stocks are drifting.

Markets never move in straight lines, and neither do individual shares. Even in bull markets or crashes, there are pauses. That may be part of it. But there’s more going on.

Valuation is an obvious issue. After such powerful runs, both stocks look expensive. BAE Systems’ price-to-earnings ratio is pushing towards 30, well above the FTSE 100 average of around 17. Babcock isn’t far behind.

There may also be a technical factor at play. After such strong gains, some investors may be taking profits and rotating into sectors that have been left behind. With many FTSE 100 stocks now trading at bargain valuations, capital is being redeployed. That may have knocked demand for defence stocks, even while the underlying story remains intact.

Both still have plenty to offer. BAE Systems’ full-year results in February showed underlying operating profit up 12% to £3.32bn in 2025, beating forecasts. Its order backlog hit a record £83.6bn, while net debt fell 22% to £3.84bn.

Babcock’s latest full-year results, published in November, saw underlying operating profit up 19% to £201m, with a contract backlog of £9.9bn.

Investors chasing bargains

Investors may be waiting for the next catalyst before pushing shares higher. Fresh results or major contract wins would help. Government spending is another factor. The UK faces pressure to increase defence budgets, but is short of cash. The same dilemma applies across Europe, with the exception of Germany. Politicians may prioritise competing demands such as protecting households from rising energy costs.

If governments do commit to sustained increases in defence spending, or if tensions escalate further, the sector’s earnings visibility would strengthen. That could draw investors back in.

The defence rally has already priced in a lot of good news, and it’s struggling to push to the next level. At current valuations, it’s easy to see why investors are cautious. I’m wary myself. I hold BAE Systems shares and wouldn’t dream of selling them. But I’m looking elsewhere for my next opportunity. There are so many bargains on the FTSE 100 today, I hardly know where to start…

The post Are investors running scared of Babcock and BAE Systems shares? appeared first on The Motley Fool UK.

Although the aerospace and defence giant continues to post spectacular results, I can’t help but think most of the gains are now priced in. For value investors hunting something with more growth potential, I think one of its rivals looks more promising.

An up-and-coming contender

Babcock International (LSE: BAB) has been one of the standout performers in the FTSE 100 over the past year. Up more than 100%, it’s outpaced even Rolls’ impressive rally, thanks to booming demand in defence and support services. Now, investors are asking if Babcock could achieve growth similar to Rolls since its pandemic lows. 

Admittedly, defence can be a questionable industry as there’s always uncertainty around the ethics of its products. This poses both a risk and moral implication that investors should take into consideration.

Crunching the numbers

In its latest half-year results to September 2025, Babcock posted earnings growth of 49% year-on-year, while revenue climbed a solid 7.4%. That’s no flash in the pan — it’s coming from a £9.9bn order backlog across submarine, aviation and training contracts.

Furthermore, operating margins expanded moderately to 7.9%, indicating improving efficiency at extracting more profit from sales. The full-year outlook remains steady, with management guiding for continued growth.

Valuation-wise, the shares trade at a forward price-to-earnings (P/E) ratio of 24.6, slightly below the average for aerospace and defence peers. That’s reasonable when you consider analysts forecast earnings to grow 7.5% annually for the next few years.

Compared to rivals such as BAE Systems, it’s trading at fair value, not stretched like some high-flyers. Think of it like buying a reliable work van that’s done a few extra miles but comes with a full service history. A solid income earner without the premium price tag.

The pros and cons

Naturally, nobody wants to see global conflicts drag on unnecessarily. Unfortunately, that’s where we are, which means UK defence spending is set to rise. With the UK government committing 2.5% of GDP by 2027, Babcock’s set to continue bringing in revenue for the foreseeable future.

Of course, it isn’t risk-free. Contract delays or cost overruns — common in defence — could squeeze margins. Plus, any easing of geopolitical heat might slow new orders. And a more pronounced market wobble could hit the shares hard too.

The bottom line?

It’s unlikely Babcock (or any share) will be able to replicate Rolls-Royce’s once-in-a-lifetime performance. Growth like this is seldom seen in anything other than highly-speculative tech stocks – and often, it’s followed by a big crash.

However, based on recent performance and supportive macro headwinds, I think Babcock’s one of the more appealing growth stories right now. The 1.6% dividend yield may be a bit underwhelming for income investors but, growth-wise, I see lots of potential.

If you’re after a steady, reliable gainer that has long-term legs, I think it’s worth considering. More interested in dividends? There’s also a host of attractive income stocks on the FTSE 100 right now…

The post Forget Rolls-Royce shares! I’ve got my eye on a more promising UK growth story appeared first on The Motley Fool UK.

Lately, nothing has stood in their way. Both FTSE 100 stocks took off after Russia invaded Ukraine in 2022 and have only climbed since. The BAE Systems share price is up 52% over the last 12 months, and 336% over five, with dividends on top. Babcock International Group’s performance is even more eye-watering. Its shares are up 104% over one year and 420% over five.

FTSE 100 offensive sector

Europe is rearming to counter Vladimir Putin, and now we have Iran to worry about. If China moves on Taiwan, we could soon have the hat-trick. That’s not taking into account the unpredictable reactions in the White House. It’s a sad reflection on humanity.

These multiple threats do make UK defence stocks a compelling proposition, but investors must tread carefully. The old investment rules still apply, so be wary of chasing past performance, and overpaying for an asset. 

BAE Systems and Babcock are both expensive by conventional metrics, their price-to-earnings ratios are now pushing 27. That’s comfortably above today’s FTSE 100 average of around 18. 

To give those numbers more context, the average BAE Systems P/E over the last 10 years has been around 18 times earnings. In the last decade, Babcock’s P/E has fallen as low as 3.5. However, this was skewed by a spell of plunging earnings around the pandemic.

Rising profits and order backlogs

BAE Systems’ full-year results in February showed underlying operating profit up 12% to £3.32bn in 2025, beating forecasts. Its order backlog hit a record £83.6bn, while net debt fell 22% to £3.84bn. Babcock’s last full set landed on 21 November. Underlying operating profit was up 19% to £201m, while its contract backlog hit £9.9bn.

Yet lately, investors have begun to appear wary. Shares in both BAE Systems and Babcock are actually lower than they were a week ago, as investors suspected they’d flown as high as they could for now. Some will have taken profits.

Today, conflict with Iran is priced in, so it could take something else to drive them even higher. That could come in the shape of the UK announcing a big defence spending boost, or still more big contract wins. On the other hand, if we get some kind of peace deal, both shares could retreat in short order. At least until the next threat emerges.

It’s interesting to see BAE Systems rising much faster than Babcock today, but not hugely surprising. It’s the bigger, broader defence play, the go-to stock for investors in times of trouble. Also, Babcock has outperformed lately, and investors may feel BAE will flex its superior muscle power.

For investors seeking exposure to the defence sector, both stocks merit consideration with a long-term view. No share climbs forever, but sadly, the winds of war are firmly in BAE Systems’ and Babcock’s favour today.

The post Are red-hot BAE Systems and Babcock shares simply unstoppable now? appeared first on The Motley Fool UK.

Looking for defence stocks to consider buying today? Here are two that could be worth checking out, along with a thematic exchange-traded fund (ETF) that could also be worth a look.

A defence powerhouse

When it comes to UK defence investments, it’s hard to ignore FTSE 100 firm BAE Systems (LSE: BA.). With a market-cap of around £65bn, it’s the largest pure-play defence company on the London Stock Exchange.

A diversified business, it makes a range of products including aircraft, ships, submarines, combat vehicles, weapon systems, and munitions. It also has a fast-growing cyber and intelligence business.

Now, this stock has had a huge run over the last three years (more than doubling in price). However, I still believe it’s worth considering today.

Last month, it reported a 12% rise in full-year operating profit for 2025 and a record £84bn order backlog. It also told investors it expects a ‘new era’ of defence spending to drive growth for years to come.

I’ll point out that the valuation here is a little on the high side (the price-to-earnings (P/E) ratio’s about 25). This could be an issue if growth doesn’t materialise in the years ahead.

Taking a five-year view though (our preferred investment horizon here at The Motley Fool), I reckon this stock will grow into its valuation and do well. With NATO spending on the rise, it should continue to see top- and bottom-line growth.

A smaller FTSE 100 player

While BAE Systems tends to hog the spotlight, there’s another top defence stock in the FTSE 100 index. That’s Babcock International (LSE: BAB).

It manufactures a range of defence products from naval ships to weapons handling systems. It also offers exposure to nuclear technology and tech-enabled solutions in areas such as secure communications, electronic warfare, and air defence.

This company’s financial year ends at the end of this month, so we haven’t had its full-year results yet. However, a Q3 trading update posted in January was very encouraging. Here, it said that the strong performance reported for the first half of the year had continued.

Note that for H1, operating profit was up 27% year on year. And at the end of the first half, the company had a contracted backlog worth about £10bn.

The P/E ratio here – using next financial year’s earnings forecast – is about 22. I think that’s reasonable. Again though, if defence spending suddenly drops, the stock could come under pressure.

A top defence ETF

While I’m bullish on BAE Systems and Babcock shares, I’ve personally chosen to invest in the HANetf Future of Defence ETF instead. This is a thematic ETF that provides broad exposure to the industry.

With this product, I get access to around 60 businesses. Some names in the portfolio include Rheinmetall, Lockheed Martin, and RTX Corp.

Obviously, the fact that it’s focused on one industry is a risk (it’s not diversified by sector like a FTSE 100 ETF is).

But I think it’s worthy of further research and It’s certainly been a good investment for me.

The post 2 top UK defence shares and an ETF to consider buying as geopolitical instability hits the stock market appeared first on The Motley Fool UK.

Shares in smaller FTSE 100 sector peer Babcock International Group (LSE: BAB) have rocketed 118% over the same period. Over five years, BAE and Babcock are up 322% and 411% respectively. Yet Rolls-Royce Holdings (LSE: RR) still leaves them both in the shade.

Rolls has shot the lights out, rising 116% over one year and an astonishing 1,070% over five, the biggest winner on the entire blue-chip index. Of course, it’s far more than a defence contractor. Rolls-Royce makes aircraft engines, has a thriving Power Systems division benefiting from AI data centre demand, and a potentially huge opportunity in small modular nuclear reactors.

Flying FTSE 100 sector

Across the FTSE 250, smaller defence players such as Chemring, Goodwin, and QinetiQ are also going great guns. The sad truth is that investors are responding to rising geopolitical tensions. Russia and Ukraine remain locked in conflict. The US and Iran are close to confrontation. China is a huge worry. Germany is planning to pump €500bn into arms, and other European states are being pushed to up their spending. In the UK, there’s talk of a £28bn defence ‘black hole’.

It would be brave to bet against defence stocks today. But after such a blistering run, valuations look stretched. Expectations are high, and even a small earnings miss could be punished.

Typhoon fighter jet and warship maker BAE Systems trades on a hefty price-to-earnings (P/E) ratio of 28.5. However, full-year results on 18 February help justify it. Underlying operating profit rose 12% to £3.32bn, beating forecasts. The order backlog hit a record £83.6bn, while net debt fell 22% to £3.84bn.

Babcock is scarcely cheaper, with a P/E of 27.9. First-half results (21 November) showed underlying operating profit up 19% to £201m, and its contract backlog rising to £9.9bn. Rolls-Royce delivers full-year results tomorrow (26 February). Keep an eye out for those — everybody else is. I’ll just say that its trailing P/E stands at a dizzying 65.

Brokers consensus forecasts

So where do brokers think the shares go next? Seventeen analysts offering 12-month forecasts for BAE Systems produce a consensus target of 2,237p. That implies a modest rise of just 5.35% from today.

Nine analysts covering Babcock are slightly more upbeat, with a consensus target of 1,547p, around 11% higher. Sixteen analysts follow Rolls-Royce, but their median target of 1,333p suggests gains of just 2%.

Of course, broker forecasts are educated guesses and often include stale assumptions. These low targets may surprise some, but show the air is getting thin at these valuations. Also, European economies are struggling, there’s a limit to how much politicians can spend on defence, or are willing to spend.

Babcock and BAE Systems remain worth considering for the long-term but after such extraordinary gains, the short term could prove bumpy. Rolls-Royce ratchets up the risk level and I personally wouldn’t consider it at today’s dizzying P/E (I may regret saying this tomorrow). If any of them dip, that might offer a better opportunity. But personally, I’m on the hunt for the next fired-up FTSE 100 growth story instead.

The post See the surprising Babcock, Rolls-Royce, and BAE Systems share price forecasts for the next 12 months appeared first on The Motley Fool UK.

Or is it? My research has just thrown up two bona-fide bargains I think are too good to ignore. Babcock International (LSE:BAB) and Sage Group (LSE:SGE) both offer exceptional value for money at current prices.

But what makes them worthy of your attention today? Read on.

A FTSE 100 momentum stock

Babcock shares have been playing catch-up to the broader defence sector in recent times. Yet despite more than doubling in value over the past year, the Footsie firm still offers market-beating value. At £14.14 per share, its forward price-to-earnings (P/E) ratio of 22.3 times is one of the lowest in the sector.

It’s true that Babcock is less geographically diversified that many blue-chip defence companies. It sources around 75% of total sales from the UK. That said, with the government taking steps to supercharge defence spending — it’s one of NATO’s frontrunners in terms of hiking spending — this doesn’t cause me too much discomfort right now.

Rising revenues and improving margins drove operating profit 27% higher in the first half, illustrating Babcock’s ability to capture business in the current favourable climate. Its contract backlog is also rising and was up £400m year on year as of September, at £9.9bn.

I think it could be one of the sector’s big winners as NATO nations rapidly rebuild their arsenals.

A top dip buy?

Sage is possibly one of the most ‘at-risk’ FTSE shares when it comes to price volatility. Fears over the potential impact of artificial intelligence (AI) on software stocks like this aren’t going away any time soon. AI could decimate their revenues if businesses choose more cost-effective options.

But at current prices, I think Sage shares are worth a close look from those who don’t follow the herd. At 823p, the firm trades on a forward P/E ratio of 17.8 times following recent price falls. That’s far below the 10-year average of roughly 31.

The company provides accounting, payroll, and human resources software. And it’s earned universal trust for handling these critical tasks. Will companies want to risk upsetting the apple cart by trusting these to AI? It’s possible, but I’m not sure. Besides, the cost of Sage’s services are negligible in the broader scheme of companies’ overall outgoings. I don’t see customers flocking to AI in large enough numbers to materially hurt revenues.

It’s also worth noting the FTSE 100 share has spent heavily on its own AI tools. And it is seeing some success, its Sage Copilot helping drive organic revenues 10% higher during September-December. As dip buys go, I think this is one of the best to consider.

The post 2 FTSE 100 shares that look dirt-cheap despite record highs! appeared first on The Motley Fool UK.

Judging from recent news flow, I think these top FTSE companies could keep soaring. Want to know why?

Babcock International

Babcock International (LSE:BAB) shares are up 112% during the last year. Yet due to years of underperformance, it still looks dirt cheap compared to the broader defence market.

I think this could underpin further share price gains, and especially given the bright outlook for London’s weapons builders. Babcock shares trade on a forward price-to-earnings (P/E) ratio of 20.9 times. That’s below the average of 32 for Europe’s broader defence sector.

A statement from UK leader Keir Starmer on Monday (16 February) provided more encouragement for investors. The prime minister said Britain must “go faster” on defence spending, following reports at the weekend that the government is planning to hike defence spending to 3% of GDP by 2029. That’s up from 2.4% last year.

Babcock is a major supplier to British armed forces and, thanks to its market-leading capabilities, makes roughly three-quarters of sales from these shores. It’s therefore well placed to capitalise on rising UK defence budgets, though investors should remember that supply chain issues and competitive pressures could hamper its performance.

Babcock’s certainly making a good fist of things so far. Operating profit jumped 27% in the first half, and the firm announced in January that it’s “seen a continuation of the strong performance reported at the half year“. Progress in the civil sector with projects like building new nuclear power plants is providing an added (and substantial) bonus.

Persimmon

I also believe Persimmon (LSE:PSN) — whose shares have soared 22% in value over one year — could continue to climb. That’s even though news from industry peers has been pretty mixed of late.

Barratt Redrow‘s profits missed expectations last week, spooking the market and sending its share price lower. But just a few days earlier Bellway said it had enjoyed “clear signs of improving customer demand in the early weeks of the current spring selling season“. For investors, the picture is clear as mud, right?

Not quite. In fact, I’m confident Persimmon’s fortunes will mirror Bellway’s more closely than FTSE 100 rival Barratt. This is thanks to its focus on entry-level and mid-market properties, demand for which is more resilient in tough times. News that completions here rose 12% in 2025 and ahead of forecasts illustrates the firm’s durability.

Lending conditions for first-time buyers — a key demographic for Persimmon — have picked up strongly. And latest news on this front is highly encouraging. The number of mortgage products on offer for maiden homebuyers are at their highest since 2008, it was announced last week. Further interest rate cuts are also likely which will boost buyer affordability across the board.

The housebuilder’s momentum might hit the buffers if the UK economy hits a fresh downturn. But on balance, I’m confident Persimmon’s profits could rise strongly over the next year, leading to further share price gains.

The post Will these FTSE 100 shares soar in 2026 on these good omens? appeared first on The Motley Fool UK.

But another UK defence share has done even better during that time, growing in value by 113%. That company is Babcock (LSE: BAB).

Over five years, Babcock has moved up by an impressive 488%. Still, that is weaker than the incredible 1,200% gain in the value of Rolls-Royce shares over that period.

Over the past year, both shares have performed brilliantly — but Babcock has done better than Rolls.

Investing a spare £1,000 today would let me buy 74 Babcock shares. Should I invest?

Here’s why Babcock has been doing well

Actually I did buy the shares a few years ago when they were far below today’s price and struck me as a bargain. But they went nowhere fast and I sold them after holding them a while.

As a sidenote, the same was true for Rolls-Royce shares: I sold at a profit but missed much of the past few years’ massive price gain.

Both moves underline why I ought to have taken an even-longer-term approach to those investing.  

So why did Babcock shares suddenly take off in recent years, after having lost over 80% of their value between 2014 and 2021?

Partly it reflected a more strategically focused business. But, like Rolls-Royce, Babcock has benefitted from surging demand for defence equipment as well as power equipment – and that has helped the share price.

Potential for further business growth

The company’s most recent interim results illustrate that. Revenues were up 5% year on year, but basic earnings per share grew 31% and the interim dividend was raised by 25%.

With exposure to both the energy and defence sectors, Babcock is well positioned to ride robust demand in coming years.

Something I like about the business is that much of its work stretches over decades. That can risk cost overruns, but more positively it helps visibility of future revenues.

There are a limited number of competitors who can provide the services Babcock does, meaning it has pricing power and can build long-term customer relationships.

Should I buy again?

Still, while a share price gain of almost 500% in five years is great for existing shareholders, it does make me wonder how attractive a purchase the stock is for my portfolio right now.

The price-to-earnings ratio is 24. That is cheaper than some rivals: BAE Systems shares sell for 31 times earnings, for example, while Rolls-Royce shares are even costlier, at 43 times earnings.

However, while Babcock may look cheap by comparison, in absolute terms I still think that valuation is quite high. Of course, it may be cheaper long term, as earnings could grow in coming years. But that remains to be seen.

I would like a bigger margin of safety when investing, though. Like any business, Babcock faces risks, such as the recent subdued level of activity at its rail business continuing.

So, at the current price, I will not be buying any of the shares.

The post £1,000 buys 74 shares in this UK defence stock that’s outperforming Rolls-Royce shares! appeared first on The Motley Fool UK.