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Highly rated aerospace analyst Adrian Murray of Exane BNP Paribas has slapped an underperform rating on Cobham, yet the shares have so far proved remarkably robust. Murray's target price of 189p also seems unforgiving since the shares have held up at 209p, while most other aerospace sector analysts continue to rate Cobham as a buy, barring UBS's sell note last month.

Still, despite appearing somewhat underwhelmed by the firm's prospects, Murray continues to like Cobham and his profit and earnings forecast is very close to the consensus. 'Cobham won't come a cropper or anything. It is very well positioned and doing really well.'

The problem is that the company 'just looks a bit expensive compared with its European peers,' says Murray.

BNP has also slapped a 10% discount on aerospace mid-cap stocks compared with large caps such as BAE Systems and Rolls-Royce.

Around 80% of Cobham's profits come from defence or defence-related sources as opposed to civil aerospace. And most of the defence is US-based. The US defence budget has almost doubled under President Bush but analysts expect it to slow down very sharply over the next eight years. So it might be as good as it gets for defence companies such

as Cobham.

It stands on a prospective PE of 14.8 for 2008 falling to 13.6 for 2009 – about the same as BAE and higher than Rolls. Cobham's enterprise value to sales ratio is one of the sector's highest at two times compared with only around one for BAE and Rolls and just 0.4 for EADS.

Murray reckons Cobham does deserve to trade at a premium but a 29% PE premium to other mid-cap aerospace companies is too great.

The premium is deserved because company strategy of investing more to generate organic growth while continuing to make acquisitions is delivering strong financial results