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Is QinetiQ Group plc (LON:QQ.) Undervalued?

QinetiQ Group plc (LSE:QQ.), a aerospace & defense company based in United Kingdom, saw a significant share price rise of over 20% in the past couple of months on the LSE. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine QinetiQ Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. See our latest analysis for QinetiQ Group

What’s the opportunity in QinetiQ Group?

The stock is currently trading at UK£2.64 on the share market, which means it is overvalued by 28% compared to my intrinsic value of £2.07. This means that the buying opportunity has probably disappeared for now. Another thing to keep in mind is that QinetiQ Group’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What does the future of QinetiQ Group look like?

LSE:QQ. Future Profit Jun 4th 18
LSE:QQ. Future Profit Jun 4th 18

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for QinetiQ Group, at least in the near future.

What this means for you:

Are you a shareholder? If you believe QQ. is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on QQ. for some time, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on QinetiQ Group. You can find everything you need to know about QinetiQ Group in the latest infographic research report. If you are no longer interested in QinetiQ Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.

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