It’s the likes of Lockheed Martin (NYSE:LMT) that come to mind when we talk about defense stocks. Leonardo DRS (NASDAQ:DRS) is an emerging defense player that’s likely to make it big in the coming years. DRS stock has been higher by almost 40% in the last 12 months, and I expect the uptrend to sustain.
As an overview, the company was formed by the merger of Rada Electronic (an Israel-based defense company) with Leonardo DRS. Rada is a manufacturer of tactical radars, and Leonardo is a supplier of defense electronic products & technologies. The combined entity has an addressable market of more than $20 billion. This provides ample headroom for growth.
From a valuation perspective, DRS stock trades at an attractive forward price-earnings ratio of 21.9. Additionally, the market-capitalization-to-sales ratio of 1.2 is attractive.
It’s also worth noting that for Q2 2022, the combined entity reported a net-debt-to-adjusted EBITDA of 0.7. The financial flexibility is high, and Leonardo is targeting mergers and acquisitions for growth. I see a multibagger in DRS stock with a long-term investment horizon.
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