Value
3.9/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 2.8 |
| P/S | 7.9 |
| EV/EBITDA | 0.0 |
| Fwd P/E | 3.3 |
| PEG | 5.0 |
| Analyst target | 4.0 |
- ▸Forward P/E: 33.4x
- ▸PEG: 1.52
DRS · Why this verdict
Why Leonardo DRS (DRS) is rated HOLD
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictHOLD
Overall score5.6/10
ConfidenceMEDIUM
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. | ↓Deteriorating |
| 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. | ↑Improving |
| 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%. | ↑Improving |
| 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. | ↑Improving |
| 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.
↓DeterioratingPrice 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.
↑ImprovingBear 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.
↑ImprovingEarnings
- 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.
↑ImprovingMomentum
- 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
4.8/10data 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 | 5.8 |
| Piotroski F | 8.9 |
- ▸Strong Piotroski F-Score: 8/9
Growth
5.2/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 4.0 |
| EPS growth | 6.4 |
Momentum
6.9/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 0.5 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 8.2 |
| Price target | 6.5 |
| erm sentiment | 5.0 |
- ▸Light analyst coverage (10.0) — signal dampened
Insider
7.3/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 10.0 |
| notable moves | 7.0 |
- ▸Insider selling (low materiality) — $2,178,729 (0.017% of mkt cap)
- ▸Institutions accumulating
Peer rank
5.2/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 5.1 |
| quality rank | 6.0 |
| growth rank | 1.5 |
- ▸Conservative debt levels
Technical
3.4/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 0.0 |
| support resistance | 1.1 |
| 52w position | 9.0 |
Risk (lower is worse)
7.7/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 9.5 |
| days to cover | 8.5 |
| volatility | 4.5 |
| put call | 8.6 |
| implied vol | 4.2 |
| max pain risk | 7.0 |
| beta | 10.0 |
| debt equity | 9.6 |
- ▸Concentration risks: 2 HIGH, 2 MED (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
7.3/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 9.0 |
| dividend safety | 7.5 |
- ▸Strong earnings: 3B/0M
- ▸Earnings in 5 days
- ▸Dividend aristocrat: 0.8% yield
How the verdict was assembled
Engine trigger
Mixed signals. Hold existing position.
Engine technical detail
verdict_path:
L4:PATH_F_HOLD_DEFAULTPassed (6)
- MOMENTUM:6.9>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- ASYMMETRY:-0.3=NEGATIVE
- EARNINGS_PROXIMITY:5d<=7d
Warning (0)
none
Reward-to-Risk
-0.29
Upside
-4.3%
Downside
15.0%
Sizing output
AVOID
SetupBreakout — Golden cross, above all MAs, RSI 64, MACD bullish
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The default F-path HOLD fired without any positive-conviction gate triggering — no momentum acceleration, no quality+value crossover, no setup recognition. Highest-clear gate: MOMENTUM:6.9>=5.5. Top dim: Risk (lower is worse) at 7.7; weakest: Technical at 3.4. The engine's read is one of pattern absence — no directional conviction in either direction at current asymmetry.
The strongest dimensions are Risk (lower is worse) at 7.7, Insider at 7.3, and Catalyst at 7.3; the weakest are Technical at 3.4, Value at 3.9, and Quality at 4.8. The V9 engine flagged 2 failed gates, producing an asymmetric reward-to-risk of -0.29 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Consistent Earnings Beat Record
Trip ifEPS surprise falls below 0% for 2 consecutive quarters, breaking the established pattern of over-delivery.
- P2Rich Valuation Minimal 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.
- P3Government Customer Concentration
Trip ifNon-government revenue exceeds 25% of total revenue for 2 consecutive reporting periods, indicating meaningful customer diversification.
- P4Waning Volume Conviction
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.