As governments accelerate investment in next‑generation capabilities, its blend of robotics, sensors and mission‑critical testing makes it a pivotal player in a sector undergoing profound change.

Fortunately for long-term investors, a disconnect between its strategic importance and its market pricing has emerged. So, how much is it and where should the shares really be trading?

Stunning earnings growth ahead

Earnings growth powers any firm’s share price over the long run. A risk for QinetiQ is a failure in any of its key systems, which may be expensive to fix and could damage its reputation. Another would be any delays or cancellations in government defence spending that could reduce demand for its services.

However, consensus analysts’ forecasts are that its earnings will grow by a whopping 77% average a year to end-2028. This looks well supported to me by growing momentum evident in its recent results and statements.

In its Q3 trading update, the firm said it expects earnings per share growth this fiscal-year 2026 of 15%–20%. Management also forecasts an operating margin of roughly 11%, underpinned by more than £3bn of orders secured year‑to‑date. This included a £205m five‑year Typhoon engineering extension and £87m of laser‑technology contracts, lifting the order backlog to about £5bn.

Such contracts highlighted QinetiQ’s strengthening position in high‑priority defence programmes that are set to expand significantly. NATO members have pledged to lift combined defence budgets to 5% of GDP by 2035, up from 2% last year, equating to $423bn (£314bn) in additional annual spending across non‑US members alone.

It is a long-term structural shift towards boosting deterrence to deter aggression, rather than a temporary fix to short-term conflicts. So, while some might see buying defence stocks as ‘profiting from war’, I see it as part of the process of underwriting peace through deterrence.

How undervalued is it?

Discounted cash flow (DCF) analysis pinpoints a company’s fair value by projecting its future cash flows and then discounting them back to today.

Analysts’ DCF modelling results can differ widely, based on the variables used — running more bearish than mine at times. In QinetiQ’s case, using a discount rate of 8.6%, my modelling suggests the stock is 33% undervalued at its current £4.75 price.

That implies a fair value of £7.09 — considerably higher than where the stock trades today.

The gap between price and value is critical to long-term investor profits because asset prices tend to converge to their fair value over time. In this case, the gap suggests a potentially terrific buying opportunity to consider today if those DCF assumptions hold.

My investment view

I already hold BAE Systems and Rolls-Royce shares, both of which I am happy with. Buying another share in the same business would unsettle the risk/reward balance of my portfolio.

So, QinetiQ is not for me right now, and I have my eye on other undervalued stocks in different sectors.

However, for other investors without the same portfolio balancing problem, I think QinetiQ looks like a rare opportunity hiding in plain sight.

The post Here’s why I think this FTSE 250 high-tech defence gem ‘should’ be trading over £7 now, not under £5 appeared first on The Motley Fool UK.

Many investors, me included, now have outsized exposure to BAE Systems, with its shares soaring 50% in the last year, and 325% over five. It’s a mighty £50bn business but looks expensive with a price-to-earnings (P/E) ratio pushing 30. Is there better value elsewhere?

Goodwin is a good ‘un

Family run engineering group Goodwin (LSE: GDWN) has a history stretching back to 1883 and has built a global business around precision engineering for the energy and industrial sectors. Today, the FTSE 250-listed group’s defence arm is leading the charge.

I was all ready to buy Goodwin a year ago, then got distracted. Now I feel it’s too late with the shares up a painful 290% over 12 months (painful for me, that is). Over five years they’re up almost 900%, lifting its market cap to £2bn. Investors who think BAE Systems is too expensive will tremble at Goodwin’s P/E though, which is nudging 82.

Expectations are just too high. In December, first-half trading profit almost doubled to £37.2m, but the shares still retreated. Some might consider Goodwin with a long-term view, but it’s too expensive for me.

Chemring is on fire too

Defence-tech specialist Chemring Group (LSE: CHG) is a sluggard by comparison, it shares are up 45% over one year and ‘only’ 85% over five.

They’ve stalled over the last six months though, despite it reporting a 31% increase in pre-tax earnings to £67.7m in December. Chemring’s order book climbed by a fifth to a record £1.34bn. That provides 76% coverage for 2026 earnings.

Lately, the shares have trailed, as mentioned. Its Sensors & Information business has been hit by delays in UK government spending and contract timings, while costs have been higher than expected on certain projects, notably its Norwegian plant. 

Chemring is winning high-margin business in intelligence work, via its Roke division, and that could drive growth in future. With a P/E of 26.5 and market cap of just £1.4bn, I think it’s worth considering for investors looking to diversify away from big gun BAE Systems.

Qinetiq almost looks a bargain

Finally, there’s Qinetiq Group (LSE: QQ), which may tempt bargain seekers like me. It shares are up a modest 28% over the year, and 75% over five. The P/E is easily the lowest here at 19.1. The market cap is £2.7bn.

Last month, Qinetiq forecast organic annual revenue growth of 3%, which is modest for this sector, citing near-term uncertainty over client spending. It nonetheless boasts an order backlog of around £5bn, and a qualified pipeline of £11bn, which says gives it “long-term visibility”. Cash flow is strong too.

Qinetiq has posted some big wins, including mission critical engineering services for Typhoon jets, while its DragonFire laser programme will deliver next‑generation counter‑drone capabilities for the Royal Navy. With laser shots costing as little as £10, this could be a huge growth area given the changing nature of warfare.

Qinetiq strikes me most as worth a further look. But I’d say BAE Systems and Chemring are also worth considering today with a long-term view as the world sadly gets more warlike.

The post 3 red-hot FTSE 250 defence stocks to consider over BAE Systems appeared first on The Motley Fool UK.

Goodwin shares fly

One of them already shooting the lights out is family-run engineering group Goodwin (LSE: GDWN). A business that stretches back to 1883, it’s steadily built a global business around precision engineering for the defence, energy, and industrial sectors. Last year, the shares went bananas.

I planned to buy before its preliminary results on 30 July but forgot while sunning myself on a Spanish beach. When I returned, the Goodwin share price had rocketed after preliminary results showed profits jumping 47% to £35.5m on revenue of £220m.

The shares have continued to smash it, boosted by a major US submarine partnership and a special dividend in October. Its shares are up 225% in a year and 695% over five. But with a price-to-earnings ratio of 71, they’re just too expensive for me today. And yes, I’m still kicking myself.

Chemring Group’s a winner too

Shares in Chemring Group (LSE: CHG), which makes defence countermeasures, sensors and explosives, are up 62% in the last year. In December, it reported a 31% jump in pre-tax earnings for the year to 31 October, with orders up a fifth to £1.35bn. The board has ambitious plans to double revenue to around £1bn by 2030.

The dreadful war in Ukraine and wider geopolitical uncertainty are clear drivers, as with all these stocks. A much-longed-for sudden peace deal, supply chain issues, or technical delays could hit growth. However, Chemring’s much cheaper than Goodwin, with a P/E of 27.5, and that gives it the edge for me. Defence sector P/Es are elevated across the board. For example, Babcock’s is at 29 and BAE Systems at 30.

Qinetiq lacks energy

Qinetiq Group (LSE: QQ) is the exception. It looks relatively cheap, with a P/E of 19.2. This is largely down to its relatively disappointing performance. The shares are up a modest 22% in the last year, trailing an otherwise bumper sector.

In November, Qinetiq posted a 4.9% drop in first-half earnings to £900.4m, which it blamed on the restructuring of its North American operations, and some order delays as clients focused on bigger contracts. It still secured £2.42bn of orders, up 133% on last year’s £1.03bn, while underlying net cash flow remained robust at £127.9m.

Qinetiq also has a £316m contract to deliver counter-drone capabilities for the Royal Navy, which is surely a huge growth area as robotic warfare takes off. I’ll need to do more research, but it’s the one I think investors could consider first, due to that modest P/E. It has scope to play catch-up, if it sorts itself out.

Investors should form their own view, which will partly depend on existing holdings. I’m heavily exposed to BAE Systems, so don’t need more sector exposure right now. And I think I’ve missed the boat with Babcock, following its unbelievable run.

The post Are these 3 under-the-radar FTSE 250 defence stocks set to fly like Babcock and BAE Systems? appeared first on The Motley Fool UK.

But beneath the surface, the business has undergone a major strategic shift that is already transforming its prospects.

So, is the market overlooking a golden opportunity in this defence‑tech specialist?

Underneath the headline numbers

Revenue for H1 fiscal-year 2025/26 came in at £900.4m, down 4.9% from £946.8m a year earlier. This reflects the restructuring of its US operations and the disposal of its low‑margin Federal IT business.

Underlying operating profit slipped 10% to £96m, while profit after tax edged 5% lower to £76.8m. However, underlying earnings per share held steady at 14.2p thanks to the accelerated share buyback programme.

Despite these short‑term pressures, cash generation remained robust, with underlying net cash flow from operations at £127.9m. 

The real standout was the company’s order performance: intake surged to £2.42bn, up an extraordinary 133% from £1.03bn last year. This drove the funded backlog to a record £4.35bn, 48% higher year on year.

Taken together, these figures show a business absorbing the near‑term impact of restructuring, in my view. And appears to be simultaneously laying the financial and operational foundations for a much stronger, higher‑margin growth trajectory.

New strategic wins reinforce growth story

QinetiQ’s recent contract wins underline how well‑positioned it is in the fastest‑growing areas of modern defence.

The standout is its role in the UK’s latest £316m contract for the DragonFire laser programme. Here, QinetiQ will work alongside MBDA and Leonardo to deliver next‑generation counter‑drone capabilities for the Royal Navy.

Laser shots cost as little as £10 compared to hundreds of thousands for traditional missiles. So this is exactly the kind of high‑value, high‑relevance technology governments are prioritising.

November saw QinetiQ deepen its presence in the Indo‑Pacific through a new partnership with Forcys. This will develop advanced underwater test and evaluation systems for Australia — a core pillar of the AUKUS security framework.

Combined with the £1.5bn Long-Term Partnering Agreement extension, QinetiQ is increasingly embedded in multi-decade sovereign defence infrastructure and mission‑critical technologies.

How undervalued is it?

Ultimately, it is earnings growth that powers any firm’s share price higher.

A risk for QinetiQ’s is any failure in one of its key systems, which could be costly to remedy and could damage its reputation. 

However, consensus analysts’ forecasts are that its earnings will grow a stunning 74% a year to end fiscal-year 2028/29.

Assuming that the analyst forecasts are right, although this is by no means a certainty, and using a discount rate of 8.2%, my discounted cash flow model estimates QinetiQ’s ‘fair value’ could secretly be close to £9.30 per share.

That is nearly twice the level at which the share trades today. And because asset prices typically trade towards their fair value in the long run, it suggests a potentially terrific buying opportunity to consider today if those analyst forecasts prove accurate.

My investment view

If it were not for the fact that I already hold two other defence stocks — BAE Systems and Rolls-Royce — I would buy QinetiQ now.

The powerhouse earnings growth should hasten the convergence between the share price and fair value seen in assets over time, in my view.

Consequently, I think the stock is well worth other investors’ consideration.

The post Is this FTSE 250 high‑tech defence leader on the brink of stunning multi‑year growth? appeared first on The Motley Fool UK.

FTSE 100-listed Vodafone (LSE:VOD) is one I’ve noted. And from the FTSE 250, Polar Capital Technology Trust (LSE:PCT) and QinetiQ (LSE:QQ.) are another two bargains that have caught my eye.

Can investors afford to pass them up? Here’s why I think they’re top value stocks to consider.

A cheap investment trust

Fears of a potential ‘AI bubble’ have driven shares in Polar Capital Technology Trust sharply lower of late. This isn’t much of a surprise given the investment trust’s large holdings in AI stocks like Nvidia, Meta Platforms, and Microsoft.

For investors who reject the bubble narrative, I think this could represent an attractive dip-buying opportunity. The trust currently trades at a 12% discount to net asset value (NAV) per share around 512p.

I like the broad range of tech shares that Polar Capital Technology contains (93 in total). This provides exposure to an array of white-hot growth segments, including AI, cybersecurity, robotics, biotechnology, and cloud and quantum computing.

Such diversification also helps protect investors against risk. Over five years, the trust’s enjoyed a total return north of 700%. I think it can keep delivering over the long term.

Defence bargain

QinetiQ’s plummeted in value during Q4, leaving it (in my opinion) one of the UK’s best-value defence shares.

Its forward price-to-earnings (P/E) ratio is a sector-leading 13.4 times. Meanwhile, its P/E-to-growth (PEG) sits at just 0.8. Any sub-1 reading indicates a share that’s trading below value.

QinetiQ’s slump is especially surprising to me given recent trading news. It remains firmly in recovery after fixes to its US business, and order intake more than doubled in the six months to September (£2.4bn).

A possible peace deal between Ukraine and Russia represents a natural threat. But in the broader geopolitical landscape, I’m expecting the company’s shares to rise strongly over time.

A FTSE value star

Vodafone’s not without its challenges. Its turnaround in Germany is likely to be a lumpy process given high competitive pressures. It also faces large ongoing capex charges that could dent earnings.

I believe these problems are more than reflected in Vodafone’s rock-bottom share price, though. Its price-to-book (P/B) ratio is 0.5 times, even after recent price gains.

Meanwhile, the company’s forward P/E ratio is 13.2 times. That’s far below the 10-year average of 17.7.

I think there’s good reason to expect Vodafone shares to continue their 2025 rebound. Progress in its core German market, allied with a tighter grip on costs show a company clearly moving in the right direction. Last month it raised profit guidance and tipped adjusted EBITDA at the upper end of a €11.3bn to €11.6bn range.

I think Vodafone can rise steadily as telecoms demand gradually rises, with particular strength expected in the cheap share’s African markets.

The post Can investors afford to miss these 3 dirt-cheap UK shares? appeared first on The Motley Fool UK.

Take the following FTSE 250 shares: QinetiQ (LSE:QQ.), Softcat (LSE:SCT), and TBC Bank (LSE:TBCG). Each now trades on a rock-bottom earnings multiple following heavy price falls.

Could they rebound in December?

Defence bargain

UK defence shares like QinetiQ have fallen sharply in recent days. The prospect of peace in Ukraine would be welcome after years of bloodshed. But it could have significant impact on defense sector profits if sales slump afterwards.

News of a ceasefire could cause defence contractors to fall further. However, the chances of a peace deal being struck — or holding out after any ceasefire — remain uncertain. The failure of a US-brokered deal could have the opposite effect and prompt shares to rally.

The low valuation on QinetQ shares in particular may help it to rebound in this event. A 16% share price drop over the last month leaves it on a forward price-to-earnings (P/E) ratio of just 13.7 times. This is one of the lowest multiples across the European defence sector.

QinetiQ’s share price also commands a P/E-to-growth (PEG) ratio of 0.8. A reading below 1 implies a share is going mega cheap.

Tech star

Fears of an AI bubble have spread across the broader tech sector in recent weeks. Information technology provider Softcat has sunk 13% as investors have reduced or closed out positions.

It’s a decline I think merits serious attention from bargain hunters. The business trades on a forward P/E ratio of 19.7 times.

As the chart shows, this is historically a rock-bottom rating for Softcat shares.

My view is that worries over the AI sector have been overblown, as Nvidia‘s blowout results last week showed. I’m backing Softcat to rebound when market sentiment stabilises.

Over the long-term, I’m confident the company could surge in value as increasing digitalisation drives sales. That’s despite the threat of rising costs and competition from US tech shares. Softcat’s share price has rocketed 410% since November 2020.

Bargain bank

TBC Bank has long been one of the most eye-catching FTSE 250 value shares. Having declined 10% over the last month, it’s now a bargain I think merits serious attention from investors.

Its forward P/E ratio is 5.4 times. That makes it the cheapest UK-listed bank share, well behind the likes of Lloyds (11.9 times) and HSBC (9.8 times), for instance.

Furthermore, a 6.6% dividend yield for this year is one of the sector’s highest.

The bank’s shares have dropped after it said full-year profits will undershoot prior forecasts. Current problems include regulatory changes that have introduced a cap on microloans, a key market for the company.

Yet I think the market has overreacted to the news. Trading remains strong, as Georgia’s booming economy drives financial services demand. And the business is accelerating its shift from microloans to areas like SME lending to overcome its recent travails.

I think TBC could spring back as investors wake up to its exceptional all-round value

The post Could these dirt-cheap FTSE 250 shares enjoy a December rebound? appeared first on The Motley Fool UK.

A FTSE 250 tracker fund maybe worth a close look in this climate. However, investors could potentially achieve better returns by purchasing individual shares instead.

With this in mind, here are two top growth shares that are tipped to soar in value.

QinetiQ

Defence shares like QinetiQ (LSE:QQ.) have surged since Russia invaded Ukraine in early 2022. As the world rapidly rearms following the conflict, analysts expect this particular contractor to rise another 27% in value during the next year.

City analysts expect QinetiQ’s earnings to rise 17% this financial year (to March 2026). Further double-digit rises are expected through to financial 2028 as well.

I’m not surprised given the market outlook. In the UK — from which the FTSE 250 company sources two-thirds of sales — defence spending is tipped to rise to £73.5bn by 2027/2028. That’s up from £62.2bn in the current year. Similar upswings are planned across QinetiQ’s other NATO (and NATO-partnered) customers.

The defence sector is famously competitive, meaning contract wins are never guaranteed. Other threats to profits include supply chain disruptions and surging costs.

But the Hampshire company looks well placed to navigate these challenges. It ended the June quarter with a record order book of £5.3bn, and tipped organic sales growth of 3% for the current financial year.

Despite strong share price gains, QinetiQ still look very cheap, with a price-to-earnings growth (PEG) ratio of 0.8. This makes it a great value growth share to consider.

Softcat

IT services provider Softcat‘s (LSE:SCT) had a bumpier ride in recent years but is still worth further research.

Given its more cyclical operations, this is perhaps not a surprise: growth shares with high multiples can struggle during uncertain economic periods. Today, Softcat shares trade on a price-to-earnings (P/E) ratio of 21.8 times.

But City analysts are expecting its share price to jump 24% over the next 12 months.

Forecasters are confident market conditions will improve as interest rates fall, giving Softcat’s profits a steady boost. Earnings are expected to rise 2% in the 12 months to July 2026, before accelerating to 9% in fiscal 2027.

The Buckinghamshire business is a real growth hero, delivering 20 straight years of double-digit gross profit growth. Its wide expertise — which includes cybersecurity, networking and cloud computing — has helped it effectively seize on the 21st century’s digital revolution.

Right now, it’s working to boost its AI capabilities for future growth, and this year purchased data and AI consultancy Oakland. This marked the company’s first ever acquisition.

Softcat’s gross profit rose 18% last financial year, though a 19% rise in underlying costs took the shine off somewhat. Cost pressures remain a notable threat going forwards, while competition from US peers is another possible roadbump.

But on balance, I’m optimistic Softcat’s shares can rise sharply as analysts predict.

The post Prediction: these FTSE 250 growth stocks are set to explode appeared first on The Motley Fool UK.

Changes to consumer demand

The Budget influences consumers’ disposable income via taxes. If households feel squeezed, consumer demand may weaken. Slowing consumer demand reduces revenues for companies across retail, services, and leisure. So, I’m watching out for signs that either direct or indirect taxation could rise.

If this happens, I will stay away from domestic FTSE companies that are most sensitive in terms of needing revenue directly from consumers. Instead, I will increase my allocation to more international companies in the index. After all, their performance depends on global demand rather than just from the UK.

Economic growth outlook

With recent economic data not looking great, I expect some measures from the government to help to spark activity. One example could be to hold or even lower corporation tax, and make up this shortfall from windfall taxes on certain sectors. Stocks could also get a boost if the ISA allowance is increased.

Whatever measures are chosen to try to make the UK more attractive, there will be key winners and losers in the stock market. If it’s related to corporation tax, I will filter for companies that pay the most tax. These firms stand to gain the most.

Spending projections

A big factor will be how much the government is going to borrow moving forward and what it chooses to spend this on. Clearly, there’s a need to try to balance the books. But investors will take note of areas where the government decides to cut back on, versus sectors where spending could even increase.

For example, QinetiQ (LSE:QQ) is on my watchlist. It derives about 61% of its revenue from contracts with the Ministry of Defence. When the government signals increased spending on defence build-up or new procurement programmes, QinetiQ is well positioned to benefit from contract wins. At a company level, this translates to revenue growth and improved profit margins.

Over the past year, the share price is up 8%. Looking ahead, the defence budget could be maintained or even increased if perceived global threats are taken seriously. On the other hand, if the government tightens its belt, QinetiQ is exposed. This could be via delayed award payments, changes in procurement policy, or shifts to alternative, cheaper suppliers. Some of this impact could be buffered by revenue from other clients. But ultimately, the scale of dependence on the government can’t be ignored.

It’s too early to make a call now, but I think it’s a good example for investors to consider after the Budget announcements.

The post 3 ways the Autumn Budget could impact FTSE stocks appeared first on The Motley Fool UK.

I think much of this reflects ongoing market uncertainty arising from the firm’s 17 March trading update. This highlighted delays in short-term contracts in its UK Intelligence sector and its Global Solutions business (primarily in the US).

At that point, QinetiQ revised its full fiscal year 2025/26 organic revenue growth forecast down to 2%, with an underlying margin of around 10%. These figures also included the effect of £25m–£30m in one-off charges.

Before this, it had projected high single-digit organic revenue growth and an underlying margin above 12%.

Adding recent bearish pressure on the stock was the downgrading of the stock to Hold from Buy by broker Kepler Cheuvreux. The short-term risks cited were the same as those earlier highlighted by QinetiQ. However, the brokerage added that the stock is likely to recover in H2.

Longer-term outlook

I regard the full standard investment cycle as 30 years. This would cover starting to invest around the age of 20 and looking to retire around the age of 50.

Given this, as a long-term investor (after several years as a senior investment bank trader), I always loved short-term risks. They often meant the ability to pick up fundamentally solid stocks on the cheap that would recover relatively quickly and perform strongly over time.

In QinetiQ’s case, the business fundamentals look very sound to me — and to other analysts.

The consensus forecast is that the firm’s earnings will increase by a whopping 67.4% annually to end-fiscal year 2027/28. And it is growth here that powers any firm’s stock price over the long term.

What’s the price-to-valuation gap?

In my experience, asset prices tend to converge to their ‘fair value’ over time. This value reflects several business fundamentals, including earnings growth. And this is reflected in cash flow forecasts for any firm.

The best way I have found to ascertain any stock’s fair value is the discounted cash flow method. This highlights where any share price should be, based on cash flow forecasts for the underlying business.

In QinetiQ’s case, it shows the shares are 43% undervalued at their current £4.70 price. Therefore, their fair value is £8.25.

Secondary confirmations from comparisons of key stock measures with its peers confirm this undervaluation.

For example, on the key price-to-sales ratio, it trades joint bottom of its competitor group at only 1.2. These companies comprise Babcock at 1.2, BAE Systems at 2.1, Chemring at 2.9, and Rolls-Royce at 4.9.

My investment view

Given these factors, I believe QinetiQ is a short-term risk/long-term reward play.

However, I already own two other stocks in the defence sector – BAE Systems, and Rolls-Royce. Adding another would unsettle the overall balance of my portfolio.

So if I wanted to buy QinetiQ then I would have to sell one of these two. However, both have been performing extremely well, and I do not want to tinker with that.

For other investors though, I think the firm is well worth considering.

The post A 67% forecast annual earnings growth but down 19%, is this FTSE 250 defence stock a great short-term risk/long-term reward play? appeared first on The Motley Fool UK.

In my quest to find the next stock market winners, I’ve come across the following high-power business. Here’s why it’s worth serious consideration, in my view.

Robust returns

Defence companies have proved to be be among the best-performing growth stocks following the pandemic. Russia’s invasion of Ukraine in early 2022 first sparked the sector rally, as NATO countries bolstered their defence budgets after years of underinvestment.

Since then, conflict in the Middle East and growing concerns over Chinese expansionism have given defence shares an added boost.

FTSE 250-quoted QinetiQ (LSE:QQ.) is one company that’s thriving in the current climate. Latest financials showed its order backlog at record highs of £5bn as of June.

Driven mainly by strong share price gains, the business has delivered an a total average annual return of 15% since 2020. That trumps the UK mid-cap index’s 8% return over the same period.

QinetiQ provides a wide range of products and services to governments across the globe. Roughly 70% of revenues are sourced from its home market, where it has strong relationships with the Ministry of Defence (MoD). The firm’s other two main markets are the US and Australia.

Cyber opportunity

As I say, QinetiQ’s expertise spans a range of applications across air, sea and land. Its operations include manufacturing target systems, supplying robots and training combat staff. This gives it many ways to capitalise on rising defence budgets, and reduces reliance on one area to drive earnings.

What I also like about the company is its expertise in the field of cyber security, something that many other defence shares don’t offer. This is a rapidly growing segment as online attacks from individuals, groups and state actors become increasingly common.

Latest data from the UK’s National Cyber Security Centre (NCSC) showed “a 50% increase in highly significant incidents” over the last year. These comprise attacks that impact the central government, essential services, large numbers of the domestic population, or the national economy.

Against this backdrop, QinetiQ sealed £110m worth of contracts with the MoD between April and June. It’s already a major supplier to the MoD’s multi-year, £1.2bn new Digital and IT Professional Services (DIPS) framework.

Sustained growth

A bright outlook for defence spending means City analysts expect QinetiQ to deliver sustained double-digit earnings growth over the next few years. Ambitious cost-cutting and US restructuring is also tipped to give the bottom line an extra jolt.

Naturally, there are dangers to these forecasts. The defence sector’s highly competitive, and further contract wins are never guaranteed. An uncertain outlook for US defence spending is something else investors must consider. QinetiQ sources almost a fifth of revenues from the States.

Yet I think this FTSE 250 growth stock has what it takes to thrive in what is on balance an extremely favourable trading landscape. What’s more, with a price-to-earnings growth (PEG) ratio of 0.9, QinetiQ shares look undervalued to me and worth considering.

The post 15% annual returns! Here’s a FTSE 250 growth hero to consider appeared first on The Motley Fool UK.