Both the past week and past 12 months have been interesting times for Meggitt (LSE:MGGT). The Meggitt share price has experienced some interesting growth in these time periods. Rumours of a takeover caused the spike in share price last week. Based on current levels and takeover rumours, is the Meggitt share price an opportunity right now?
An aerospace firm that isn’t suffering too badly
Meggitt Group is one aerospace firm that isn’t faring too badly in the current economic climate. The impact of the Covid-19 pandemic on the aviation and aerospace industry has been well documented. The Meggitt share price, though, hasn’t fared badly, in my opinion.
Meggitt Group is an engineering firm that operates in three core divisions: civil aerospace, defence, and energy. Over 50% of Meggitt’s revenue comes from its aerospace division. The applications of its products include civil aircraft, helicopters, engines, and business jets. It says that its parts are fitted to “almost every jet airliner, regional aircraft, and business jet in service”. Defence generates over 30% of revenue with applications deriving from military aircraft, vehicle, naval, and space markets.
Despite the well documented, difficult market conditions, Meggitt hasn’t suffered too much. It has been able to avoid running up high levels of debt. Furthermore, it has not had to raise capital by selling shares.
Meggitt share price continues to rise since crash
The share price gain Meggitt experienced at the end of last week was closely linked to takeover rumours. A report emerged from the US that aerospace engineering group Woodward Inc may be considering a deal. Woodward is a £5.7bn market cap firm, compared to £3.6bn Meggitt. There hasn’t been any comment from Meggitt regarding this news though. Today has seen its share price dip nearly 4% as I write.
The Meggitt share price has risen nearly 100% in the past 12 months. As I write, shares are trading for 482p per share. This time last year, I could buy shares for 245p per share. Covid-19 caused most shares to crash badly when the world’s airlines were shut.
In February of 2020, Meggitt’s share price fell from over 600p per share to around 220p. That’s a 65% drop. Reviewing these figures and timeline, Meggitt’s shares are still cheaper than pre-crash levels at current levels.
Buy or avoid?
Meggitt has a good track record of performance with a history of double-digit profit levels and good cash generation. Furthermore, many of its products are essential to modern day aerospace vehicles. As I mentioned earlier, it has not been hit too badly by the market crash and pandemic.
During the pandemic, I avoided buying airline and aviation stocks. Restrictions are now easing and pent-up demand may even assist in a quicker recovery. Aviation body IATA, however, believes flying levels will not return to 2019 levels until approximately 2024.
I am still of the same view and would not want to risk my hard earned money just now. The Meggitt share price is trading on close to 20 times 2022 forecast earnings, which is a bit too expensive for my liking.
I would rather look to make a passive income from FTSE 100 stocks. Here are some I like just now that could boost my portfolio.