Value
4.3/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 2.9 |
| P/S | 8.1 |
| EV/EBITDA | 0.0 |
| Fwd P/E | 3.8 |
| PEG | 5.4 |
| Analyst target | 5.0 |
- ▸Forward P/E: 31.1x
- ▸PEG: 1.41
DRS · Why this verdict
Why Leonardo DRS (DRS) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score4.7/10
ConfidenceHIGH
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
A consistent earnings beat record over the past year has sustained a forward price-to-earnings multiple of 32 times, but the stock has essentially reached its price target with the risk/reward ratio unfavorable; an 80% customer concentration in a single government buyer adds structural fragility that a rich multiple can only absorb until a single contract disappointment materializes.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
At a forward price-to-earnings multiple of 32 times, the stock is priced for near-perfection, while the current price sits just 6% below the identified price ceiling — a thin margin that leaves the risk/reward ratio well below a favorable threshold and the downside meaningfully larger than the available upside. Price targets | Over 12 months, earnings growth accelerates enough to compress the forward multiple below 22 times at the current price, justifying the premium without requiring further price appreciation. | →Stable |
| CounterDefense businesses with long-cycle contract visibility often command structural premiums to the broader market; a 32 times forward multiple may be reasonable if the contract backlog and program mix support durable above-market growth. | ||
Approximately 80% of revenue derives from the U.S. government, a single-buyer concentration that creates material dependency on budget cycles, continuing resolutions, and procurement decisions outside the company's control. Bear case | Over 12 months, non-government revenue grows to represent more than 25% of total revenue, meaningfully reducing the single-buyer concentration risk. | →Stable |
| CounterLong-term defense contracts provide revenue visibility and payment certainty that most commercial customers cannot match; for a defense-focused business, government concentration can be a stability feature rather than a vulnerability. | ||
The company has beaten earnings estimates in three of the last four quarters with an average positive surprise of nearly 13%, demonstrating a pattern of under-promising and over-delivering that has supported analyst confidence in forward estimates. Earnings | Over 12 months, the earnings beat streak continues with positive surprises in at least 3 of the next 4 quarters, maintaining the average surprise above 5%. | →Stable |
| CounterDefense program timing can create lumpy revenue recognition that flatters short-term beat streaks; a single delayed contract award or program restructuring can produce a sharp miss without any change in the underlying business quality. | ||
On-balance volume is declining despite the stock trading near its 52-week highs — a distribution signal suggesting that institutional holders may be reducing exposure into price strength rather than accumulating at current levels. Momentum | Over 12 months, on-balance volume returns to a rising trend for at least 3 consecutive months, indicating that volume conviction is supporting rather than contradicting the price level. | →Stable |
| CounterVolume-based indicators can produce false signals in thinly traded small-cap defense names where a single large block trade can distort on-balance volume trends for weeks. | ||
At a forward price-to-earnings multiple of 32 times, the stock is priced for near-perfection, while the current price sits just 6% below the identified price ceiling — a thin margin that leaves the risk/reward ratio well below a favorable threshold and the downside meaningfully larger than the available upside.
→StablePrice targets
- Expectation
- Over 12 months, earnings growth accelerates enough to compress the forward multiple below 22 times at the current price, justifying the premium without requiring further price appreciation.
CounterDefense businesses with long-cycle contract visibility often command structural premiums to the broader market; a 32 times forward multiple may be reasonable if the contract backlog and program mix support durable above-market growth.
Approximately 80% of revenue derives from the U.S. government, a single-buyer concentration that creates material dependency on budget cycles, continuing resolutions, and procurement decisions outside the company's control.
→StableBear case
- Expectation
- Over 12 months, non-government revenue grows to represent more than 25% of total revenue, meaningfully reducing the single-buyer concentration risk.
CounterLong-term defense contracts provide revenue visibility and payment certainty that most commercial customers cannot match; for a defense-focused business, government concentration can be a stability feature rather than a vulnerability.
The company has beaten earnings estimates in three of the last four quarters with an average positive surprise of nearly 13%, demonstrating a pattern of under-promising and over-delivering that has supported analyst confidence in forward estimates.
→StableEarnings
- Expectation
- Over 12 months, the earnings beat streak continues with positive surprises in at least 3 of the next 4 quarters, maintaining the average surprise above 5%.
CounterDefense program timing can create lumpy revenue recognition that flatters short-term beat streaks; a single delayed contract award or program restructuring can produce a sharp miss without any change in the underlying business quality.
On-balance volume is declining despite the stock trading near its 52-week highs — a distribution signal suggesting that institutional holders may be reducing exposure into price strength rather than accumulating at current levels.
→StableMomentum
- Expectation
- Over 12 months, on-balance volume returns to a rising trend for at least 3 consecutive months, indicating that volume conviction is supporting rather than contradicting the price level.
CounterVolume-based indicators can produce false signals in thinly traded small-cap defense names where a single large block trade can distort on-balance volume trends for weeks.
Per-dimension breakdown
Quality
4.5/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 3.6 |
| ROA | 3.7 |
| Gross margin | 0.9 |
| Op margin | 3.6 |
| Net margin | 3.9 |
| Current ratio | 6.6 |
| FCF quality | 6.6 |
| Moat | 4.2 |
| Piotroski F | 7.8 |
- ▸No competitive moat
- ▸Strong Piotroski F-Score: 7/9
Growth
5.2/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 4.0 |
| EPS growth | 6.4 |
Momentum
2.5/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 0.0 |
| OBV | 1.0 |
| MA position | 6.0 |
| Volume | 0.0 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
5.8/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 7.5 |
| erm sentiment | 5.0 |
Insider
4.1/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 4.5 |
| insider conviction | 2.6 |
| holder change | 5.1 |
- ▸Modest insider selling — $3,877,978 (0.033% of mkt cap)
Peer rank
3.2/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 5.9 |
| quality rank | 5.7 |
| growth rank | 1.1 |
Technical
8.4/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 8.3 |
| support resistance | 9.1 |
| 52w position | 7.7 |
Risk (lower is worse)
5.8/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 9.3 |
| days to cover | 7.0 |
| volatility | 2.2 |
| put call | 7.4 |
| implied vol | 4.9 |
| beta | 10.0 |
| debt equity | 0.0 |
- ▸Concentration risks: 2 HIGH, 2 MED (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
7.0/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 9.0 |
| dividend safety | 6.0 |
- ▸Strong earnings: 3B/0M
- ▸Dividend: 81.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:33d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- MOMENTUM:2.5<4.5
- ASYMMETRY:0.3<1.5@spot
Warning (0)
none
Reward-to-Risk
0.32
Upside
+2.6%
Downside
8.2%
Sizing output
AVOID
SetupUNKNOWN — No clear chart pattern; technical signals are mixed
EdgeNO_EDGE — No clear edge identified
SuitabilityMODERATE — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 3.2 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Technical at 8.4) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( MOMENTUM:2.5<4.5, ASYMMETRY:0.3<1.5@spot) reinforce the read. Current asymmetry R:R is 0.32 — supplementary context, not the trigger for this path.
The strongest dimensions are Technical at 8.4, Catalyst at 7.0, and Sentiment at 5.8; the weakest are Momentum at 2.5, Peer rank at 3.2, and Insider at 4.1. The V9 engine flagged 2 failed gates, producing an asymmetric reward-to-risk of 0.32 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1The company has beaten earnings estimates in three of the last four quarters with an average positive surprise of nearly 13%, demonstrating a pattern of under-promising and over-delivering that has supported analyst confidence in forward estimates.
Trip ifEPS surprise falls below 0% for 2 consecutive quarters, breaking the established pattern of over-delivery.
- P2At a forward price-to-earnings multiple of 32 times, the stock is priced for near-perfection, while the current price sits just 6% below the identified price ceiling — a thin margin that leaves the risk/reward ratio well below a favorable threshold and the downside meaningfully larger than the available upside.
Trip ifForward earnings estimates are revised upward such that the forward P/E compresses below 22x at the current price, indicating that growth is justifying the premium.
- P3Approximately 80% of revenue derives from the U.S. government, a single-buyer concentration that creates material dependency on budget cycles, continuing resolutions, and procurement decisions outside the company's control.
Trip ifNon-government revenue exceeds 25% of total revenue for 2 consecutive reporting periods, indicating meaningful customer diversification.
- P4On-balance volume is declining despite the stock trading near its 52-week highs — a distribution signal suggesting that institutional holders may be reducing exposure into price strength rather than accumulating at current levels.
Trip ifOn-balance volume rises above its prior 3-month average and holds that rising trend for 3 consecutive months, confirming that institutional accumulation has resumed.