Image source: Getty Images
These FTSE 250 Growth stocks look like brilliant bargains at current prices. Here's why I think they deserve a closer look.
Chemring Group
Supply chain issues continue to be an issue across the aerospace and defense industry. However, the surge in demand means Chemring Group (LSE:CHG) is one of several defense companies doing well.
In truth, the company's stock price has disappointed in 2024. It is currently down by mid-single-digit percentages so far this year after last week's update sparked heavy selling.
I think it could be one of the biggest bargains in the global defense industry.
On Tuesday (December 17), Chemring, which makes countermeasures such as flares for aircraft, ships and land vehicles, said revenue rose 9% in the 12 months to October 2024, to £510.4m. Meanwhile, its order book surpassed the £1bn barrier for the first time, rising 13% year-on-year to £1.04bn.
For this financial year, analysts believe Chemring's profits will increase by 28%. An additional 12% increase is also planned for fiscal year 2026.
This means the FTSE 250 company offers solid value with a price-earnings-growth (PEG) ratio of 0.6. Any reading less than 1 implies that a stock is undervalued.
I am not surprised by the City's optimism. Defense spending is increasing globally and Chemring is investing heavily to capitalize on it. It aims to reach £1 billion in annual revenue by 2030 and expand manufacturing in the UK, US and Norway to achieve this goal.
A strong balance sheet leaves the company in good shape to invest heavily in growth as well. Its net debt to underlying EBITDA (earnings before interest, taxes, depreciation and amortization) target was 0.56 in October, well within its target of less than 1.5 times.
NCC Group
NCC Group (LSE:NCC) is another bargain FTSE 250 share worth a close look. Its share price is up 16% since the start of 2024, although it has fallen sharply following a cold December trading update.
I think this could be a tasty buying opportunity for investors. Their PEG ratios for the next two financial years (ending September 2025 and 2026) are below the 1 water mark, at 0.3 and 0.7, respectively.
These are supported by expected annual earnings growth of 84% and 26% for this year and next.
On December 10, NCC spooked investors by announcing that it had seen “a lengthening of sales cycles” in more recent months. This reflects trends in the broader market and could continue if sluggish economic conditions persist.
While it's worth considering, the recent problems wouldn't deter me from buying tech stocks if I had cash to invest. In my opinion, any additional problems are due to the low rating. What's more, the long-term outlook remains extremely strong.
Sales continue to increase as the number of online threats grows exponentially. Over the 16 months to September, NCC's revenue rose 28.2% to £429.5m. This reflects its wide range of services, including incident detection, consulting and assurance.
The company is undergoing a major transformation to also maintain its impressive sales momentum. The measures include relocating some of its operations, rebranding and seeking contracts of greater value and duration with its Managed Services unit.
