BAB recommendation14 Nov 2017 12:08
Below is an article from AJ Bell Shares Mag 2/11/17 - hope this helps alleviate some nerves.
SHARES IN BABCOCK have fallen by 14% this year as investors fear it will suffer the same fate as its London-listed outsourcing peers Interserve (IRV), Capita (CPI) and Mitie (MTO), all of whom have issued profit warnings in 2017 or late 2016.
Several analysts are now saying the shares look really good value and we agree. Even fund managers are getting excited including Seneca Investment Managers which has recently added the stock to a number of its portfolios, saying the market shouldn�t associate Babcock with the aforementioned support services firms.
�We believe the company is fundamentally different to others in its sector. It has a very skilled workforce, and these workers are increasingly in short supply.
�The company operates in complex, highly regulated and often secretive industries, so the barriers to entry are high.
�Contracts are long term in nature and allow gains and pains to be shared with customers. Unlike many peers, Babcock doesn�t depend on cost-plus contracts that often rely on add-on work at high margins to earn a decent overall return.�
Examples of work undertaken by Babcock including refitting UK nuclear submarines and naval ships, maintenance of the London Fire Brigade�s fire engine fleet and operating air ambulance fleet.
Nine analysts now have �buy� ratings on Babcock versus four �holds� and two �sells�, according to Reuters data. The median target price is �10.20, implying potential to make nearly 25% return in a year.