Assessing Leonardo DRS (DRS) Valuation As Defense Tech Progress And Backlog Support Growth Expectations

Leonardo DRS (DRS) has drawn investor attention after presenting at the Alabama National Guard Conference in Mobile, where it highlighted its counter drone and submarine detection capabilities, along with its revenue, earnings, and backlog figures.

See our latest analysis for Leonardo DRS.

The recent Alabama National Guard presentation sits alongside strong momentum in the shares, with a 90 day share price return of 14.51% and a 3 year total shareholder return of 225.60%. This suggests interest has been building rather than fading.

If this kind of defense technology story has your attention, it can be useful to compare it with other opportunities in related areas through a 31 power grid technology and infrastructure stocks

With revenue of US$3.65b, net income of US$278m, a US$8.7b backlog and recent share price gains, the key question now is whether Leonardo DRS still trades at a discount or if the market is already factoring in future growth.

Most Popular Narrative: 6.8% Undervalued

At a last close of $47.43 versus a fair value estimate of $50.90, the most followed narrative frames Leonardo DRS as modestly undervalued, with that gap anchored in contract momentum and profitability assumptions rather than sentiment alone.

The updated analyst framework raises the fair value estimate for Leonardo DRS by about $2.80 to $50.90. This reflects higher modeled revenue growth, profit margins, and an outlook that aligns with recent price target increases on the Street to a range of roughly $47 to $59, as analysts cite contract wins, backlog stability, naval propulsion opportunities, and Germanium supply efforts.

Read the complete narrative.

Want to see what is baked into that $50.90 figure? The narrative leans on faster growth, higher margins, and a valuation multiple that is not especially conservative.

Result: Fair Value of $50.90 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, that narrative can crack if germanium supply issues squeeze margins, or if reliance on large U.S. defense contracts exposes revenue to budget or timing shifts.

Find out about the key risks to this Leonardo DRS narrative.

Another Way To Look At Valuation

The fair value narrative presents Leonardo DRS as 6.8% undervalued, but the P/E numbers tell a tougher story. At 45.4x earnings compared with a fair ratio of 29.4x, 38.6x for the US Aerospace & Defense industry, and 28.9x for peers, the shares look expensive, so how comfortable are you paying that kind of premium?

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

Given the mix of optimism around contracts and concerns about valuation and supply risks, it makes sense to review the details yourself and move quickly to form your own view using 2 key rewards and 1 important warning sign

Looking For More Investment Ideas?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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