BA · BAE Systems plc
This is a quantitative scorecard. The numbers below are read from BAE Systems plc’s ESEF annual report, in GBP. The narrative — what the business does, its risks, what changed this year — is not machine-read here, so we do not paraphrase it. The filed annual report →
Where the money comes from
read the 10-K →Products is 84% of revenue, with Services the other meaningful line at 16%.
- Products84%£75.4B
- Services16%£14.1B
From the segment footnote of the company's own 10-K. Shares are of total revenue; the profit bar shows each segment's share of segment operating profit, before unallocated corporate costs.
The record
What the business has done across the cycle, read straight from the ESEF filing: the multi-year record, and the walk from reported profit to the cash an owner could take out.
The record, 2020–2025
realized figures from each filing · older years to the left| 2020’20 | 2021’21 | 2022’22 | 2023’23 | 2024’24 | 2025’25 | |
|---|---|---|---|---|---|---|
| Income statement | ||||||
| £19.3B | £19.5B | £21.3B | £23.1B | £26.3B | £28.3B | RevenueRevenue |
| £1.9B | £2.4B | £2.4B | £2.6B | £2.7B | £2.9B | Operating incomeOp. inc. |
| 10.0% | 12.2% | 11.2% | 11.1% | 10.2% | 10.3% | Operating marginOp. mgn |
| £1.3B | £1.8B | £1.6B | £1.9B | £2.0B | £2.1B | Net incomeNet inc. |
| 15% | 10% | 17% | 17% | 13% | 17% | Effective tax rateTax rate |
| Cash flow & returns | ||||||
| £1.2B | £2.4B | £2.8B | £3.8B | £3.9B | £3.4B | Operating cash flowOp. cash |
| (£133M) | £689M | £1.2B | £1.9B | £2.0B | £1.4B | Working capital & otherWC & other |
| £92M | £96M | £94M | £131M | £173M | £183M | CapexCapex |
| 0.5% | 0.5% | 0.4% | 0.6% | 0.7% | 0.6% | Capex / revenueCapex/rev |
| £1.1B | £2.4B | £2.7B | £3.6B | £3.8B | £3.2B | Owner earningsOwner earn. |
| 5.6% | 12.0% | 12.9% | 15.7% | 14.3% | 11.5% | Owner earnings marginOE mgn |
| £1.1B | £2.4B | £2.7B | £3.6B | £3.8B | £3.2B | Free cash flowFCF |
| 5.6% | 12.0% | 12.9% | 15.7% | 14.3% | 11.5% | Free cash flow marginFCF mgn |
| £746M | £777M | £802M | £857M | £937M | £1.0B | Dividends paidDiv. paid |
| 21% | 22% | 15% | 18% | 14% | 16% | ROICROIC |
| 26% | 23% | 14% | 17% | 17% | 17% | Return on equityROE |
| 11% | 13% | 7% | 9% | 9% | 9% | Retained to equityRetained/eq |
| Balance sheet | ||||||
| £2.7B | £2.9B | £3.1B | £4.1B | £3.4B | £3.4B | Cash & investmentsCash+inv |
| £858M | £811M | £976M | £1.2B | £1.3B | £1.4B | InventoryInvent. |
| £858M | £811M | £976M | £1.2B | £4.2B | £4.5B | Operating working capitalOper. WC |
| £9.4B | £8.8B | £10.6B | £11.8B | £11.8B | £12.1B | Current assetsCur. assets |
| £9.4B | £8.7B | £9.8B | £10.9B | £12.3B | £12.3B | Current liabilitiesCur. liab. |
| 1.0× | 1.0× | 1.1× | 1.1× | 1.0× | 1.0× | Current ratioCurr. ratio |
| — | — | — | £11.4B | £13.3B | £12.7B | GoodwillGoodwill |
| £27.5B | £27.1B | £31.5B | £32.1B | £38.1B | £37.7B | Total assetsAssets |
| £5.4B | £5.1B | £5.2B | £5.1B | £8.4B | £7.3B | Total debtDebt |
| £2.8B | £2.1B | £2.1B | £1.0B | £5.0B | £3.8B | Net debt / (cash)Net debt |
| 5.5× | 7.7× | 5.4× | 6.1× | 5.5× | 6.0× | Interest coverageInt. cov. |
| £4.9B | £7.7B | £11.4B | £10.7B | £11.6B | £11.8B | Shareholders’ equityEquity |
| Per share | ||||||
| 3.19B | 3.18B | 3.11B | 3.03B | 3.01B | 3.00B | Shares out (diluted)Shares |
| £6.04 | £6.13 | £6.83 | £7.62 | £8.73 | £9.45 | Revenue / shareRev/sh |
| £0.41 | £0.55 | £0.51 | £0.61 | £0.65 | £0.69 | EPS (diluted)EPS |
| £0.34 | £0.74 | £0.88 | £1.20 | £1.24 | £1.08 | Owner earnings / shareOE/sh |
| £0.34 | £0.74 | £0.88 | £1.20 | £1.24 | £1.08 | Free cash flow / shareFCF/sh |
| £0.23 | £0.24 | £0.26 | £0.28 | £0.31 | £0.34 | Dividends / shareDiv/sh |
| £0.03 | £0.03 | £0.03 | £0.04 | £0.06 | £0.06 | Cap. spending / shareCapex/sh |
| £1.54 | £2.41 | £3.66 | £3.54 | £3.85 | £3.93 | Book value / shareBVPS |
| 5-yr | 5-yr | |
|---|---|---|
| Revenue / share | +9.4%/yr | +9.4%/yr |
| Owner earnings / share | +26.4%/yr | +26.4%/yr |
| EPS | +11.1%/yr | +11.1%/yr |
| Dividends / share | +8.0%/yr | +8.0%/yr |
| Capital spending / share | +16.2%/yr | +16.2%/yr |
| Book value / share | +20.6%/yr | +20.6%/yr |
Net income is the accountant's number; owner earnings is the cash an owner could take out. The walk between them, off the cash-flow statement, and whether the gap is widening or holding.
In fiscal 2025 the business turned £2.1B of profit into £3.2B of owner earnings: more cash than the profit line showed, after the non-cash charges and the capital it put back in.
| FY2025 | FY2024 | FY2023 | FY2022 | FY2021 | |
|---|---|---|---|---|---|
| Reported net income | £2.1B | £2.0B | £1.9B | £1.6B | £1.8B |
| Working capital & othertiming of cash in and out, other non-cash items | +£1.4B | +£2.0B | +£1.9B | +£1.2B | +£689M |
| Cash from operations | £3.4B | £3.9B | £3.8B | £2.8B | £2.4B |
| Capital expenditurecash put back in to keep running and to grow | −£183M | −£173M | −£131M | −£94M | −£96M |
| Owner earnings | £3.2B | £3.8B | £3.6B | £2.7B | £2.4B |
| Owner-earnings marginowner earnings ÷ revenue | 11% | 14% | 16% | 13% | 12% |
Owner earnings is the cash an owner could pull out without starving the business: operating cash less the capital it must spend to hold its position .
Maintenance capex is estimated as depreciation where a growing business invests above it; free cash flow is the figure the scorecard's free-cash margin reads.
Quality & stewardship
Returns, the balance sheet, and stewardship. The same checks the US pages run, in the reporting currency.
Owner’s Scorecard
Will it survive?
- ComfortableOperating income £2.9B ÷ interest expense £488M
What this means
Operating profit covers interest with the kind of margin Graham wanted for a defensive holding. Necessary, not sufficient, it says solvent, not cheap.
- How heavy is the debt, net of cash? £3.8B · 1.3× operating profitModest net debtCash £3.4B − debt £7.3B
What this means
Netting £3.4B of cash and short-term investments against £7.3B of debt leaves £3.8B owed, about 1.3× a year's operating profit (2.5× on the gross debt, before the cash). Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.
- Not enough data
What this means
The filing data didn't include the inputs for this check.
Is it a good business?
- High through the cycle6-yr median, range 14%–22%; 16% latest = NOPAT £2.4B ÷ invested capital £15.6BIndustry peers: median 9%
What this means
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 6 years (it ran 16% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
- Solid through the cycle6-yr median margin, range 6%–16%; latest £3.2B = operating cash £3.4B − maintenance capex £183MIndustry peers: median 4%
What this means
What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 11% of revenue this year, a 12% median across 6 years.
- Cash-backedCash from ops £3.4B ÷ net income £2.1B
What this means
How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.
How is the cash used?
- Reinvests most of itDividends + buybacks £1.0B ÷ Owner Earnings £3.2B
What this means
Of £3.2B Owner Earnings, £1.0B (32%) went back to shareholders, £1.0B dividends, £0 buybacks. Returning most of it is the mark of a mature business with little left to reinvest at a high return; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.
- Investing or harvesting? —Not enough data
What this means
The filing data didn't include the inputs for this check.
Graham’s defensive tests · 2 of 5 met
Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.
- Adequate size —Revenue ≥ $2B (a dollar floor) · £28.3B
What this means
Big enough to weather a storm. Graham's floor is a dollar figure — about $2B of revenue as a conservative modern stand-in. This company reports in its home currency and we carry no exchange rate, so we show the figure and leave the size bar for you to apply rather than convert it with a number we don't have.
- Strong liquidity MissCurrent ratio ≥ 2× · 0.99×
What this means
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
- Conservative debt MissDebt ≤ working capital · £7.3B vs (£156M) WC
What this means
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
- Earnings stability PassA profit every year (6-yr record) · no losses
What this means
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
- Dividend record PassUninterrupted dividends · paid every year (6)
What this means
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
- Earnings growth NearEarnings +33% over the record · +26%
What this means
At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.
- Moderate price —P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
What this means
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are £0.65/share (latest year £0.69), the averaged base the calculator's gate runs on, and book value is £3.93/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.
Durability & moat, 2020–2025
Whether the record’s returns held, and what the capital reinvested earned.
- Profitable years 6 of 6
What this means
Never lost money over the record, the earnings stability Graham insisted on.
- Return on capital ≥ 15% 4 of 6 yrs
What this means
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
- Operating margin 11% → 11% (3-yr avg ends)
What this means
Through the cycle the operating margin held roughly steady — about 11% early, 11% lately, median 10%.
- Reinvestment, incremental ROIC 9%
What this means
Reinvested capital came back at only a modest incremental return — near the cost of capital, where extra growth adds little per dollar. The record shows whether it is a soft stretch or a thinning moat.
- Owner earnings growth +15%/yr
What this means
Owner earnings grew about 15% a year over the record.
- Worst year 2020 · 10.0% op. margin
What this means
Stayed profitable even in its hardest year, the resilience that survives recessions.
- Share count −1.3%/yr
What this means
The share count is shrinking, buybacks are quietly growing your slice of the business.
- Dividend record rising
What this means
Paid and raised the dividend across the record, the continuity Graham prized.
Does AI threaten the moat?
Low contestabilityThe moat is physical, regulated or balance-sheet-funded, the kind AI cuts costs within but does not contest.
The filing raises AI among its risks, but in other terms (security, regulation, energy or the like), not as a competitor to its product.
AI is unlikely to contest a moat that is physical, regulated or balance-sheet-funded; here it reads more as a cost tool than a threat.
Read from the filing's own risk factors, paired with the industry's structure under its SIC code; the durability is read above, the price below.
All figures as filed; the source filing is linked above.
How the cash was used, 2020–2025
Over the record, the business generated £17.6B of operating cash; how management split it reads as a balanced allocator, splitting cash between the business, owners, and the balance sheet.
- Reinvested£769M · 4%
- Dividends£5.1B · 29%
- Retained (debt / cash)£11.7B · 66%
- Returned to owners£5.1B
31% of the owner earnings the business produced over the span, £5.1B as dividends and £0 as buybacks.
- Net change in share count−6.1%
The diluted count fell from 3192M to 2997M, so the buybacks outran the stock issued to staff.
- Dividend record£0.34/sh
Paid in 6 of the years on record, the per-share dividend growing about 8% a year. It was never cut over the span.
- Return on what it retained28%
Of the earnings it kept rather than paid out (£5.4B over the span), annual owner earnings (first three years vs last three) grew £1.5B, so each retained £1 added about 0.28 of yearly owner earnings. Buffett's test, run on owner earnings instead of market value.
Buybacks are gross of stock issued to staff; the share-count line above is the net of that, the figure that decides whether owners gained. The average price paid blends a year of purchases (and any accelerated repurchase), so it is close, not exact. The record of where the cash went and on what terms.
Inverting the record
Invert: instead of why BAE Systems plc is a good business, the question is what would make owning it a mistake, and whether those marks are in the record. Disconfirming tests across 2020–2025.
None of the 5 tests turned up a mark; each came back clean. A clean panel says only that these particular ways of being wrong are not written into the record.
- Is it less profitable than it was?
- Did the share count rise anyway?
- Did debt outgrow the business?
- Did reported profit become cash?
- Did receivables and inventory outpace sales?
Each test is read from the filings and is noisy alone; a flag can mark a cyclical trough or a year of heavy investment as easily as a problem. The filing says which.
The price
What a price would have to assume, set against the record above. You bring the price, in the reporting currency.
What the price implies
reverse-DCFType today's close and see the owner-earnings growth you'd have to believe to justify it, beside what BAE Systems plc has delivered.
Through the cycle, BAE Systems plc earns about £3.5B on its 12.5% median owner-earnings margin. This year’s 11.5% margin runs in line with that. Normalize, below, values the price on that through-cycle figure rather than the latest year.
—
9.0% = the 4.55% 10-year Treasury (Jul 15, 2026) + 4.45 points of equity premium. The rate you require is yours to set.
Enter a price above to run it.
A dated snapshot of the price you typed, the assumptions you set, and what the page showed for them. A snapshot is never edited after it is saved. Your notebook is yours alone — the commitment states what is stored and what we will never do.
Graham capped the multiple at 15×; Buffett and Munger let that rule go: a wonderful business can deserve 50× if the thesis holds. The gate marks the bargain-hunter's floor.
Prefilled with the 10-year Treasury (4.55%, as of Jul 15, 2026). Edit it for today’s exact figure, or a AAA corporate yield.
Graham measured a stock against the bond you could own instead, the heart of his margin of safety. Enter a price above to weigh the owner-earnings yield against this bond.
Owner earnings £3.2B on 2997M diluted shares; net debt £3.8B. The base is the latest year by default; Normalize values it on the through-cycle median owner-earnings margin (to avoid paying on a peak year). Net of stock comp treats option pay as the expense it is. The dials set the multiple a growth belief justifies; the price, and every dollar on this page, is yours.