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An action that I have of FTSE All-Share The index with continuous potential is Avon Protection (LSE: AVON).
Is it the best stock to buy in the index right now? I wouldn't say that, because it will be different for every investor, but I really like it.
Active in the defense industry.
Business is another play on the defense issue. So, as governments tend to increase defense spending, there is a lot of momentum in the sector.
There is also a lot going on in the business and stock price recently, as the chart shows:
The company designs, develops, tests and manufactures integrated protection systems. The company's portfolio includes full-face respirators, ballistic helmets, escape hoods, self-contained breathing apparatus (SCBA) systems, modular powered air-purifying respirator (PAPR) units, thermal imaging cameras and underwater equipment.
At the end of January, order intake for the first quarter of the business year was 36% higher than 12 months earlier. Directors said the push was due to strong demand for helmets and respirators. For example, the company won a contract with the German navy: such is the quality of its clients.
At the start of 2024, the order book was 21% higher than the previous year's figure, suggesting strong operational momentum in the business.
City analysts have forecast a rise in normalized earnings just above 31% for the business year to September 2025. In contrast, the forward earnings multiple is just below 24 with the share price at 1.202 pence (April 26).
Is that a fair assessment? After all, the FTSE All-Share Index trades with an average trailing price-to-earnings (P/E) ratio as low as around 12.
Recovery, growth and risks
I'd say the rating here is good as long as the strong earnings growth continues. One way to judge a fair valuation is to compare the earnings multiple with the growth rate. If the P/E is equal to or lower than the earnings growth rate, one could argue that the valuation is fair.
However, these methods can be risky. If Avon Protection misses its estimates, or if the current growth rate declines, the valuation may be lower. In other words, instead of the market assigning a multiple of 24, Avon's P/E could fall to, say, 15.
A rating downgrade like that can sometimes cause the stock price to drop and shareholders can lose money on the stock.
However, I am optimistic that the growth can prove lasting. On top of that, the company is recovering well and restructuring after a disastrous episode that destroyed the business and the stock a few years ago. The directors ended up closing the company's bulletproof vest business after its products failed US military tests. Oh!
Therefore, Avon Protection is a recovery bet and also a growth proposal. However, that painful bulletproof vest episode reminds us investors that stocks and companies carry risks as well as opportunities. Before the debacle, the stock had been flying high.
However, I'm in this one, despite the risks, and see it as a good contender in the FTSE All-Share Index which requires more research and evaluation now. It could be an interesting addition to a diversified portfolio.
