Has BAE Systems Overextended Following Robust Defense Contract Gains for 2025?

Written by Emily J. Thompson, Senior Investment Analyst

Source: Yahoo Finance

Updated: Dec 17 2025

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Source: Yahoo Finance

Current Stock Performance: BAE Systems has experienced a recent pullback, with a 3.6% decline over the past week and 7.9% over the last month, but remains up 44.3% year-to-date and 45.0% over the past year, driven by defense contract wins and increased government spending.
Valuation Insights: The company scores a 5/6 on valuation, indicating it is undervalued, with a Discounted Cash Flow (DCF) analysis suggesting a 23.3% discount to its intrinsic value of £21.69 per share.
PE Ratio Comparison: BAE Systems trades at a PE ratio of 25.1x, below the industry average of 46.1x, and its Fair Ratio is estimated at 30.1x, further supporting the view that the stock is undervalued based on earnings.
Dynamic Investor Narratives: Investors can create personalized narratives about BAE Systems' future, which can influence their valuation assessments, with varying estimates ranging from £13 to £25 based on differing growth outlooks and risk considerations.

About the author

Emily J. Thompson

Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.