Bae System

13839 Words56 Pages
Raghav Pandey
Word Count: 5,483
ACC4053 | Financial Analysis

1. Introduction
2. Valuation of the Company
2.1 An evaluation of BAE Systems’ current position and its future prospects
2.2 Assessment of the value of BAE Systems based on the application of suitable cash flow based valuation techniques
2.3 Assessment of the value of BAE Systems based on the application of suitable accounting based valuation techniques
3. Comparison of the valuation with the ‘market’ valuation
4. Appendices 4.1 Appendix 1: PEST Analysis 4.2 Appendix 2: SWOT Analysis 4.3 Appendix 3: Porter’s Five Forces Model 4.4 Appendix 4: Key Financial Ratios 4.5 Appendix 5: Weighted Average Cost of Capital
…show more content…
Today, the group has become one of the largest defence contractors in the world with customers over 100 countries and combined sales of group exceeding £22bn in 2010, compared to £13bn in 2006.
BAE Systems had a market capitalisation of £11.3bn as on 31 December 2010 whereas its net assets on year-end had a value of £5.4bn. The difference in the figures itself illustrates the company’s value and position in the market.

Chart 2: Defence Revenue of the three companies over five year period (US$bn)
(Source: Defense News)
Note: The ‘Defense News’ figures were used to avoid inaccuracies of exchange rates when converting BAE figures from £ to $ for each year. Defense News has not published the 2010 figures yet.
As indicated in Chart 2, BAE has had consistent growth in revenue over the last five years which is in line with the growth in the industry itself. However, BAE had the highest relative growth among its competitors and surpassed both Northrop and Boeing to become the second largest defence contractor from number four in 2005. Such steady growth has placed the company in a superior position in the industry. It has also given BAE the ability to continue to compete against its rivals and win contracts for national governments as well as develop advanced products.
BAE’s growth over the years has been fuelled by defence spending of its two main buyers, US and
Open Document