Whereas we now have seen plenty of inventory market turbulence to date this yr, one firm that has shrugged it off is BAE Programs (LSE: BA). The BAE share price has soared 51% because the begin of 2025. Meaning the share has greater than tripled over the previous 5 years.

For the customarily staid-seeming defence sector, that could be very sturdy efficiency.

Can it proceed – and in that case, ought I to think about including the share to my portfolio?

BAE Programs has the wind in its sails

The defence atmosphere has modified considerably over the previous few years, main many European governments to spice up their budgets. That has been excellent news for defence contractors throughout the board, together with BAE Programs.

Final yr, for instance, the UK defence big reported a 14% development in revenues. In the meantime, internet revenue was up 5% and got here in not far under £2bn.

The corporate expects gross sales and underlying earnings per share to rise by mid single to low double percentages this yr.

A buoyant finish market may not all the time imply a cut price

However whereas defence spending is stronger than earlier than, I do have some issues.

Now we have seen previously that when occasions are sturdy, defence contractors can get gung ho making long-term offers that then change into costly for them to ship, as prices rise over time.

Checked out in that gentle, I’ve blended views on BAE’s order backlog. It ended final yr at a document excessive of £78bn. That’s good because it reveals that the corporate has plenty of work to maintain it totally occupied. But it surely may additionally tie the corporate up for years to come back and a few of these orders might transform much less worthwhile than they give the impression of being now when they’re lastly delivered.

On high of that, BAE Programs has a powerful world presence, together with within the US. Ongoing tariff uncertainty may distract administration consideration from development and it might additionally eat into the underside line.

Contemplating that, the present BAE share price-to-earnings ratio of 27 seems to be costly to me. I believe it presents an inadequate margin of security for me if even a few of these dangers come to cross.

Momentum may proceed

That doesn’t imply that the BAE share price may not go greater from right here. The current momentum factors to the truth that many buyers are excited in regards to the agency’s prospects. That would assist pushing the share price up. An enormous contract win or different constructive information may additionally increase the share price.

However as an investor, I’m focussed on fundamentals not momentum. Primarily based on what we at present know in regards to the agency’s industrial outlook, I believe the share price is dear. I’ve no plans to speculate.