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Serco offers exposure to the growing role of governments

The company's price to forward earnings ratio is at a four-year low despite delivering impressive revenue growth with an improving profit margin.
Serco offers exposure to the growing role of governments
  • Recently acquired a defence business in the US
  • Strong balance sheet gives it opportunity for further acquisitions
Tip style
Value
Risk rating
Medium
Timescale
Medium Term
Bull points
  • Strong improvement in free cash flow
  • M&A in high-margin US market
  • Go-to government outsourcer during pandemic
  • Rising margins
Bear points
  • Revenue to slow in the second half of the year
  • Lots of political scrutiny

Serco acts as a wingman to governments around the world, offering a wide range of outsourced services from military satellite communications to helping the unemployed back to work. Governments have needed all the help they can get during the past 18 months as the pandemic has raged. Serco has benefited.

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