Serco Stock Hits Multi Year High

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Serco Stock Hits Multi Year High

Serco (Srp) Stock Hits 11-Year High

There are many mid-cap stocks in the FTSE 250 which have secured a sizable upside. One such name is Serco (SRP), which is up by 31% YTD and has managed to hit an 11-year high.

The Serco (SRP) is an outsourcing specialist for the government. They are involved in hospitals, justice, transport, immigration, and so on. But the biggest sector for Serco (SRP) is defense, which accounts for 40% of revenue.

Forecast: 2% Y/Y Increase In Revenue

Recently, Serco (SRP) released a bullish update which showed an expected 2% increase in revenue y/y. Meanwhile, the operating profit (underlying) was near 140 million.

In addition, the firm also secured contract awards worth 3 billion recently, and most of them were from the defense sector.

Also, Serco recently acquired a few companies, which will further improve its presence in the defense markets. Especially given the increase in military budgets worldwide, this could play in Serco's business.

But there are a few concerns that must be considered when it comes to Serco. The first one is their growth rate forecasts, which don't show anything special.

According to Citi, the revenue of Serco is expected to reach 5.2 billion in 2027. This means around a 2.7% compound annual growth rate, which isn't that good at all.

Given that the immigration and defense services are in strong demand, this number is uninspiring at best. Also, the earnings of Serco are expected to jump 8% during 2025 - 2026.

With all things considered, it is best to skip the Serco stock for now. The stock is already at multi-year highs and is a mid-cap stock at best.

On top of that, the growth prospects of Secro are not that interesting. So, if we compare all of these risks with the potential rewards, it becomes clear that Serco is not the best option right now.

Especially, many people don't want to invest in defense stocks, which also makes Serco a not-so-great option.

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