Cohort plc

Overview

This report provides a comprehensive investment analysis of Cohort plc (LSE:CHRT), a UK-based technology group specializing in the defence and security markets. The analysis is conducted in the style of expert investor William J. O'Neil, utilizing his CAN SLIM methodology to assess the stock's potential for significant capital appreciation.

Financial and Business Overview

Cohort plc operates as a parent company to seven agile businesses across the UK, Australia, Germany, and Portugal, organized into two segments: Communications & Intelligence and Sensors & Effectors. The company serves a global client base in defence and related markets. For the fiscal year ending April 30, 2025, Cohort reported record financial results, demonstrating powerful momentum. Revenue surged by 33% to £270 million, and pre-tax profit increased by 29% to £25.6 million. Basic Earnings Per Share (EPS) grew by a solid 19% to 45.07p. The company's financial health is robust, underpinned by a record-breaking closing order book of £616.4 million, which provides excellent revenue visibility into the mid-2030s. The company has also demonstrated a commitment to shareholder returns, increasing its dividend by 10% to 16.30p per share, continuing an unbroken streak of dividend growth since its 2006 IPO.

Market Position & Competitive Advantages

Cohort operates as a strategic mid-tier supplier in the burgeoning global defence industry. Its competitive advantage lies in its diversified portfolio of specialized, high-technology subsidiaries. These businesses offer niche, advanced solutions (e.g., submarine sonar, electronic warfare, satellite communications) that are critical components for larger prime contractors and government agencies. This agile structure allows Cohort to innovate and deliver advanced solutions with speed, a key advantage in the rapidly evolving security landscape. The primary tailwind is the significant increase in global defence spending, driven by geopolitical tensions and NATO commitments. However, risks include the cyclical nature of government defence budgets and intense competition from larger, more established players like QinetiQ and Chemring. Furthermore, a recent Moody's report on UK credit strategy warns that smaller and mid-cap industrial firms face pressures from higher leverage and tighter financing conditions, which could pose a structural risk to companies in Cohort's size category. The company's future growth is also tied to its ability to continue making successful, value-accretive acquisitions like the recent purchase of EM Solutions.

Stock Performance

Cohort's stock has been a strong performer, with a 52-week change of +42.5%. Over the past three months, it has gained approximately 33.9%, demonstrating powerful momentum leading up to its recent earnings report. The stock is trading above its 200-day moving average, a bullish technical indicator. However, it is currently trading at 1354p, which is approximately 25% below its 52-week high of 1796p. This pullback occurred shortly after the release of excellent annual results and may be attributed to a combination of profit-taking and news of insider share sales, potentially creating a new base and an attractive entry point for investors.

CAN SLIM Analysis

Conclusion

Cohort plc exhibits many hallmarks of a classic CAN SLIM growth stock. It has posted excellent current and annual earnings growth (C, A) and is a technical and fundamental leader in a top-performing industry group (L, M). The company is bolstered by new products and a strategic acquisition (N), and benefits from powerful geopolitical tailwinds. The primary concerns are the high valuation (trailing P/E of ~31) and recent significant insider selling (S). However, the ~25% pullback from its 52-week high, potentially driven by these sales, may offer an attractive entry point as the stock forms a new price base. Given the record order book providing long-term visibility and the overwhelming fundamental momentum, the stock rates as a 'BUY' for investors with a tolerance for growth stock volatility.