BAE Systems plc (BAESY) — Quantitative Forecast & Factor Scores
BAESY screens as lower-quality and premium-valued with positive catalysts — DCF model implies a +23% margin of safety at current levels.
BAESY's quantitative grade is Buy, with moderate downside risk (CVaR -13.4%), and quality metrics (net margin 7%, ROE 18%). BAE Systems plc (BAESY) trades at $112.65 with a valuation grade of Buy: a trailing P/E of 31.3x at a 42% premium to sector median, net margins of 7.3%, a DCF-implied intrinsic range of $114–$163 suggesting a +23% margin of safety, beta 0.01 (defensive risk profile).
Key Takeaways
- Valuation: Buy grade — P/E 31.3x — DCF range $114–$163 implies +23% margin of safety
- Risk: CVaR -13.4% (95th percentile, 1-month) indicates moderate tail exposure; beta of 0.01 amplifies broad market moves in both directions
- Strengths: Size 4.0/5, 7% net margin, 18% ROE dominate the factor profile
- Watch: Value score of 2.0/5 signals premium pricing
Quantitative Factor Profile
Key Metrics
| Metric | Value |
|---|---|
| Current Price | $112.65 |
| P/E Ratio (TTM) | 31.3x |
| Forward P/E | 21.5x |
| P/S Ratio | 2.9 |
| EV/EBITDA | 95.6 |
| Beta | 0.01 |
| Net Margin | 7.3% |
| ROE | 18.1% |
| Debt/Equity | 76.7% |
| Dividend Yield | 1.71% |
| CVaR (95%, 1M) | -13.4% |
| Market Cap | $83.1B |
BAESY vs. Sector Peers
| Ticker | P/E (TTM) | Beta | CVaR-95 | Net Margin |
|---|---|---|---|---|
| BAESY | 31.3x | 0.01 | -13.4% | 7.3% |
| EADSY | 23.8x | 0.83 | -16.2% | 7.1% |
| RYCEY | 15.8x | 1.17 | -14.8% | 27.5% |
| RHM.DE | 64.3x | 0.34 | -17.9% | 7.0% |
| THLEF | 29.8x | 0.13 | -12.6% | 7.6% |
BAESY shows mixed quality signals in the factor model, at a fully-priced valuation with limited margin of safety. Recent earnings delivery has been inconsistent against consensus.
BAESY trades at 31.3x trailing earnings — 42% above the Industrials sector median of 22.0x. The DCF model implies a +23% margin of safety — the risk/reward is currently skewed to the upside.
BAESY earns a Buy from the model, and I agree on direction. But premium multiples concentrate the risk in execution — there is not much room for a soft quarter at 31x. What I watch on this name is earnings consistency — specifically whether delivery against consensus is stable or deteriorating. That is usually where the rating gets confirmed or challenged before the price reflects it. The setup that would make me more positive is a quarter that confirms the operating leverage story. The setup that would make me cautious is any signal that consensus estimates are getting ahead of fundamentals.
Is BAESY a buy, hold, or sell?
BAESY carries a valuation grade of Buy. The trailing P/E of 31.3 sits 42% above the Industrials sector median of 22.0x — a premium that demands sustained earnings delivery. Our discounted cash flow model produces an intrinsic range of $114–$163 — implying a +23% margin of safety at the current price of $112.65. The width of the DCF range reflects genuine uncertainty in the terminal growth rate assumption: the correct framework is a probability-weighted distribution over scenarios, not a single point estimate.
Analyst estimate revisions are trending upward.
What are BAESY's key risk factors?
With a beta of 0.01, BAESY exhibits a low-volatility risk profile relative to the broad market. The 95th-percentile CVaR of -13.4% on a one-month horizon should inform position sizing directly: at a 10% portfolio weight, this tail event contributes approximately 1.3% of total portfolio loss in the worst 5% of months. Net margins of 7.3% fall below the Industrials sector average of 11%, suggesting margin pressure. Return on equity of 18.1% suggests solid capital efficiency. The balance sheet is conservatively leveraged at 77% debt-to-equity.
How does BAESY fit in a diversified portfolio?
At typical HENRY portfolio weights — 10–20% of the equity allocation — BAESY carries a beta of 0.01, meaning it amplifies broad market moves proportionally. The appropriate weight is not a function of conviction alone, but of the full covariance structure across all holdings. See the Ledoit-Wolf covariance framework for the methodology behind these calculations.
As a Industrials constituent, BAESY's risk profile should be evaluated alongside sector peers when constructing diversified portfolios.
True portfolio risk is a function of the full covariance structure across all holdings — not individual stock metrics. The Portfolio Health Check quantifies this at the portfolio level: it surfaces hidden concentration, marginal CVaR contributions, and the degree to which your overall allocation deviates from an optimal risk-adjusted mandate. The BAESY analysis here is a single node in that larger structure.
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Launch Live Analysis →This analysis is produced using a systematic quantitative framework applied to market data and does not constitute investment advice. Prose commentary is AI-assisted and generated from structured quantitative inputs. All data and metrics are as of 2026-03-31 and are point-in-time estimates subject to revision without notice. CVaR figures are based on historical simulation and do not guarantee future outcomes. DCF ranges and upgrade/downgrade triggers are forward-looking statements based on current assumptions and may not materialise. Past performance does not guarantee future results. This analysis does not account for individual circumstances, tax position, or investment objectives — consult a qualified financial advisor before making investment decisions. This content is intended for informational purposes only and does not constitute regulated investment advice under MiFID II or FCA guidelines. This content is not intended for US persons or residents of jurisdictions where its distribution would be contrary to local law or regulation. This service is not directed at residents of Finland, Sweden, Norway, Denmark, Iceland, or Poland. The author may hold long or short positions in securities mentioned in this analysis. Nothing on this page represents a solicitation to buy or sell any security. A.L. Capital Advisory is an independent private advisory practice and is not affiliated with BAE Systems plc.