Chemring Group (LSE:CHG) Could Be 22% Undervalued After Its New US Radar Deal

Chemring Group (LSE:CHG) is back in focus after its Roke subsidiary agreed to supply the Nav-Sync Miniature Radar Altimeter to a major US defence contractor in a multi year deal valued at least $170m.

The fresh contract news lands against a backdrop where Chemring Group’s 1 day share price return of 1.56% and 7 day share price return of 4.21% suggest short term momentum is picking up, even though the 1 year total shareholder return is down 4.96% and the 3 year total shareholder return is up 98.83%.

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Chemring Group now has a sizeable US radar deal, a long trading record and solid recent profit growth. The real tension is simple. After this latest jump, does the current share price still look reasonable?

Most Popular Narrative: 18% Undervalued

Chemring Group closed at £5.20, while the most followed valuation story on the stock pins fair value closer to £6.35 per share. That gap is where the long term debate really starts for anyone weighing this latest contract against the bigger earnings picture.

The investment case is supported by a record £1.4b order book, excellent revenue visibility, rising global defence expenditure and major investment in energetics capacity. The US $300m Alloy Surfaces framework adds further medium term visibility. FY2027/28 should be particularly important as today’s heavy capital expenditure begins translating into higher revenue, margins and cash generation.

See why 2 investors see Chemring Group as 18% undervalued.

According to evadav, that queue of contracted work and the capacity build out underpin a fair value band of £6.25 to £6.50, with £6.35 as a central estimate. Against the current price, that narrative frames Chemring Group as trading at a meaningful discount rather than at full tilt optimism.

Result: Fair Value of £6.35 (UNDERVALUED)

Still, the Chemring Group story can be knocked off course if the heavy capacity expansion stumbles, or if elevated capex and net debt constrain future flexibility.

Find out about the key risks to this Chemring Group narrative.

Next Steps

The contract story has real optimism baked in, but the full picture mixes clear concerns with genuine upside potential. Act quickly and pressure test both the bullish and cautious angles for yourself by weighing up the 3 key rewards and 1 important warning sign.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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