Among other things, the expected reserves will achieve a greater escalate in sales than the average for the industry in which they operate. And on this measure, Babcock International Group (LSE: BAB) almost meets this definition.

In its latest trade update, the defense group said that it expected to report revenues of 4.83 billion GBP for a year ended on March 31 (FY25), when its numbers will be finalized at the end of June. If it was made aware, it would be a 10% escalate per budget year 24.

In 2024, according to the Stockholm International Peace Research Institute, global military expenses recorded the largest annual escalate from the end of the Cold War. When Europe and the Middle East lead the road, there was an escalate of 9.4% year on year.

The sector that is developing

However, there is an ancient expression in the business world – “rotation for the show, profit for dough” – which emphasizes the importance of earnings, not sales. Here, Babcock is doing well. If everything goes to the set, he expects a 17% escalate in operational profit.

And I think there is a lot of evidence suggesting that the group will continue to grow. From April 2027, the UK government has committed to increasing defense expenditure to 2.5% of gross domestic product. And this is declared “ambition“To escalate this to 3% in the next parliament.

According to the British platform of intelligence of the Tussell public sector market, the second largest supplier of Babcock of the Ministry of Defense. During the budget year, the group generated 70% of their revenues in Great Britain. It was expected that the strategic defense review in the country would soon be completed and gave recommendations on how to spend extra cash.

In addition, thanks to the “Readiness 2030” program, planning the European Union will spend another EUR 800 billion until the end of the decade.

Pros and disadvantages

One broker is particularly impressed by the way the group has strengthened the balance in recent years. Berenberg estimates that the net debt is currently 0.3 times EBITDA (profit before interest, tax, depreciation and depreciation). At the end of the budget year 21 it was 2.4 times.

The broker claims that this improvement gives the group flexibility in further investing in ecological development, buying other companies or increasing returns for shareholders. It has a 12-month price of 910 pence shares, which is 7.5% of the bonus to today’s (16 May) value.

However, despite these positives, it should be considered that investing in the sector can be controversial. Based on morality, many funds (and private investors) will not affect the BargePole industry. Others say that the main duty of the country’s government is to protect its citizens.

Apart from these ethical considerations, I am sure that the recent share price rally will start to leisurely down. Over the past 12 months, his actions have increased by 59%.

I am also concerned that the company 31’s agreement with Royal Navy caused almost 200 million pounds of excessive costs. He is a huge figure. The chief director of the group blames the continuation of work by blocking and postpandemic inflation.

But in balance I think that Babcock is in the right sector in the right time. That’s why I recently bought some group actions. Global conflicts are increasing, as a result of which governments want to escalate military expenditure. Therefore, although depressing, as it may sound, it may be consideration of investors.