This FTSE 250 stock is up nearly 40% in 2022! Is it too late to buy shares?

Female analyst sat at desk looking at pie charts on paper

One FTSE 250 stock I am considering adding to my holdings is Qinetiq Group (LSE:QQ.). I noticed that the shares have been on a great run since the turn of the year. Is there still an opportunity for me to buy the shares at a good price?

Defence tech and security

As an introduction, Qinetiq is a defence and security company. It manufactures and supplies defence and security products using cutting edge technology. Some of these products include sensors for weapons, robotics systems, and advanced security for computer systems.

So what’s happening with Qinetiq shares currently? As I write, they’re trading for 355p. At this time last year, the stock was trading for 326p, which is an 8% return over a 12-month period. Since the turn of the year, the shares are up 36%, from 260p to current levels.

FTSE 250 stocks have risks

I believe the Qinetiq share price has rallied due to the unfortunate events in Ukraine. These events have led to a spike in defence spending, which has boosted investor sentiment for firms like Qinetiq. These events won’t last forever so I can’t help but wonder if the share price will eventually fall. This is something I will keep a keen eye on.

Next, I’ve also noticed that Qinetiq shares are trading very close to all-time highs. Whenever any stock is trading at its highest levels, I am wary that any negative news or poor performance could cause a sharp price drop.

The bull perspective and what I’m doing now

So to the positives then. From a market perspective, governments’ defence spending is a lucrative market and a renewed focus on this will only benefit businesses like Qinetiq. I notice that the company has an order book spanning hundreds of millions of dollars well into the future. This could support future growth and boost returns too.

Next, Qinetiq shares would boost my passive income stream through dividend payments. The current dividend yield on offer stands at just over 2%. This is higher than the FTSE 250 average of 1.9%. I am aware that dividends are never guaranteed and can be cancelled at any time, however.

Finally, I can see that Qinetiq has a good track record of performance. This is a plus point for me as positive performance underpins returns, although I am aware that past performance is not a guarantee of the future. Looking back, I can see it has grown revenue for the past four years in a row. Based on the current defence market and geopolitical landscape, I wouldn’t be surprised to see this trend continue, at least in the short-term.

I’m tempted to open a small position in Qinetiq shares. The FTSE 250 incumbent looks in a great position to benefit from a burgeoning market. Furthermore, the passive income opportunity is also enticing. What’s putting me off is its current valuation as well as the cyclical element of bullishness towards defence stocks.

Ultimately, I’ve decided against adding Qinetiq shares for my holdings. This is because I would prefer to buy BAE Systems shares instead if I’m buying a defence stock for my holdings. Its fundamentals look better and it is a firm with a larger profile and presence, in my opinion.

The post This FTSE 250 stock is up nearly 40% in 2022! Is it too late to buy shares? appeared first on The Motley Fool UK.

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Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.