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Relative valuation derived from Technology sector median benchmarks. Model weights: EV/EBITDA (40%), P/B (35%), P/S (25%). Multiples adjusted for extreme outliers and non-recurring volatility.
Auditing capital efficiency...
Quality Profile Audit
Score: 50GRADE C+
Composite assessment of profitability, capital efficiency, and financial strength. Top-tier entities demonstrate sustainable cash flow generation.
Return on Equity
Profit generated per dollar of shareholder equity
8.5%
Sector: -1.4%
Dividend Analysis audit
GROWTH
0.59%
Trailing Yield
$0.59
Per $100 Invested
Modest dividend — capital prioritized for reinvestment.
Est. Payout Ratio
31%SAFE
Analyst Projections
Analyst Consensus
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Based on our 6-factor quantitative model, Leonardo DRS, Inc. (DRS) receives a "Hold" rating with a composite score of 48.5/100, ranked #585 out of 4446 stocks. Key factor scores: Quality 50/100, Value 51/100, Momentum 59/100. This is quantitative analysis only — not investment advice.
Leonardo DRS, Inc. (DRS) Stock Analysis — April 2026 Rating, Price, and Forecast
Company Overview — What Does Leonardo DRS, Inc. Do?
DRS is a leading provider of defense products and technologies that are used across land, air, sea, space and cyber domains. Our diverse array of defense systems and solutions is offered to all branches of the U.S. military, major aerospace and defense prime contractors, government intelligence agencies and international military customers for deployment on a wide range of military platforms. We focus our capabilities in areas of critical importance to the U.S. military, such as sensing, electronic warfare (“EW”), cyber security, network computing, communications, force protection and electrical power conversion and propulsion. As a mid-tier defense company with a portfolio that includes internally developed proprietary intellectual property (“IP”) and offerings at the component, sub-system and system level, we are able to serve as either prime contractor or a sub-contractor on key contracts, affording us flexibility in how we approach the market. Our alignment with the nation’s top defense priorities has allowed us to achieve a 12% compounded annual growth rate (“CAGR”) in revenues from the year ended December 31, 2016 through the year ended December 31, 2020. This growth, which exceeded the DoD budget CAGR of 5.3% during such period and drove our annual revenue to approximately $2.8 billion for the year ended December 31, 2020, was driven by organic growth. During the same period, our net earnings (loss) improved by $247 million to $85 million, our operating earnings grew $178 million to$181 million and our Adjusted EBITDA grew $117 million to $268 million (CAGR of 16%). Adjusted EBITDA is a non-GAAP measure. We have a 50-year legacy of designing and manufacturing innovative and differentiated products and solutions for military applications. From our earliest sonar systems that were instrumental in detecting enemy submarines, to today’s best-in-class electro-optical sensors, we have continually developed advanced technologies to address complex military challenges. Throughout much of our history, we have targeted our investments towards the highest growth areas of the DoD defense budgets. Today, we employ approximately 6,500 people including a substantial number of highly trained engineers and personnel with security clearances to support classified programs for the U.S military. We focus on products, systems and solutions that can be adapted for installation on a wide range of military platforms. This allows us to leverage our technology investments to expand revenue opportunities. Our high-technology solutions are designed to transition from one military platform to another. In addition, we have a significant installed base of products and solutions, which allows us to enhance revenue opportunities by providing upgrades to existing platforms. This gives us a resilient position to offer new solutions and technology in changing budget environments. Our growth has been facilitated by our longstanding relationships and position as a trusted partner with the U.S. military, intelligence community and industry customers. Together, these characteristics allow us to pivot quickly to address emerging needs for our customers and generate growth opportunities in today’s dynamic defense market. We operate in three segments: Advanced Sensor Technologies, Network Computing & Communications and Integrated Mission Systems. We have achieved significant growth over the past five years by aligning our investments and technology development to address the greatest threats to U.S. defense interests. Advanced Sensor Technologies: Our Advanced Sensor Technologies segment provides world-class electro-optical sensor technologies, laser systems, EW systems and intelligence and surveillance solutions to U.S. military and intelligence community customers. We are a leading provider of ground vehicle targeting and surveillance sensors, including electro-optical and advanced detection systems. We are also a leading provider of soldier sensor systems in high priority modernization areas such as infrared imaging and precision targeting systems. Our infrared focal plane array foundry is recognized as a leading provider of high performance and small sized cryogenically cooled and uncooled detector arrays. We are also a leading and world-recognized provider of signals intelligence high-performance radio frequency receivers and transceivers for U.S. and international customers. Our quantum cascade laser technology has promising military and commercial medical applications. Collectively, these sensor technologies provide our warfighters with a distinct battlefield advantage. Network Computing & Communications: Our Network Computing & Communications segment provides advanced defense electronics solutions across warfare domains. Our technologies and products are used on legacy and new military platforms, end-to-end network communication systems, network services and cyber solutions. We are a leading provider of ruggedized computing equipment, having provided advanced tactical computing units for ground combat vehicles and command post operations for more than two decades. During this period we have delivered more than 125,000 units. For the U.S. Navy and its allies, we provide naval computing infrastructure, network and data distribution, radar and rugged naval control systems, which are present on naval surface and subsurface combatant vessels. Across the full spectrum of our network computing capabilities, we have leadership positions at both the product and sub-systems levels. Our global communications network is a worldwide network of terrestrial and satellite bandwidth that ensures our customers’ data is secure and reliable. As a result of this capability, we are positioned as one of the leading providers of secured commercial satellite communications to the U.S. military. Integrated Mission Systems: Our Integrated Mission Systems segment provides critical force protection, vehicle integration, transportation and logistics and electrical conversion and ship propulsion systems to the U.S. military. Our force protection systems protect service members and military assets from evolving threats and include solutions for counter-unmanned aerial systems, short-range air defense systems and active protection systems on ground vehicles. In 2018, we were awarded the Expedited Active Protection System program by bringing the TROPHY™ Active Protection System (“APS”) to the U.S. market, making us the leading U.S. provider of active protection systems for the U.S. Army. We were also awarded the Initial Maneuver Short-Range Air Defense (“IM-SHORAD”) Mission Equipment Package Program for the U.S. Army that year, culminating an 18-month cycle from development to customer delivery. We have military transportation and logistics offerings and ground vehicle integration capabilities to support U.S. forces in a wide range of operational environments. We provide power conversion and propulsion systems for the U.S. Navy’s top priority shipbuilding programs, building on our legacy of providing power components and systems for nearly all naval combat vessels for three decades, positioning us to continue as a leading provider of electrical ship propulsion systems and components for the U.S. Navy. We are a Delaware corporation. Our principal executive offices are located at 2345 Crystal Drive Suite 1000, Arlington, Virginia. Leonardo DRS, Inc. (DRS) is classified as a large-cap stock in the Technology sector, specifically within the Electronic Equipment industry. The company is led by CEO William J. Lynn and employs approximately 6,580 people. With a market capitalization of $12.2B, DRS is one of the prominent companies in the Technology sector.
Leonardo DRS, Inc. (DRS) Stock Rating — Hold (April 2026)
As of April 2026, Leonardo DRS, Inc. receives a Hold rating with a composite score of 48.5/100 and 3 out of 5 stars from the Blank Capital Research quantitative model.DRS ranks #585 out of 4,446 stocks in our coverage universe. Within the Technology sector, Leonardo DRS, Inc. ranks #45 of 584 stocks, placing it in the top 10% of its Technology peers. The rating is generated by a multi-factor model that weighs quality (30%), momentum (25%), value (15%), investment (10%), stability (10%), and short interest (10%).
DRS Stock Price and 52-Week Range
Leonardo DRS, Inc. (DRS) currently trades at $47.10. The 52-week high for DRS is $49.31, which means the stock is currently trading -4.5% from its annual peak. The 52-week low is $28.17, putting the stock 67.2% above its annual trough. Recent trading volume was 0 shares, suggesting relatively thin trading activity.
Is DRS Overvalued or Undervalued? — Valuation Analysis
Leonardo DRS, Inc. (DRS) carries a value factor score of 51/100 in the Blank Capital model, indicating fair valuation relative to historical norms. The trailing price-to-earnings ratio is 52.70x, compared to the Technology sector average of 45.27x — a premium of 16%. The price-to-book ratio stands at 4.50x, versus the sector average of 3.16x. The price-to-sales ratio is 3.61x, compared to 1.06x for the average Technology stock. On an enterprise value basis, DRS trades at 42.52x EV/EBITDA, versus 12.79x for the sector.
Overall, DRS's valuation appears roughly in line with sector benchmarks, suggesting the market is pricing the stock fairly given its current fundamentals and growth trajectory. Neither deep value nor significantly overpriced, the stock occupies a middle ground on valuation.
Leonardo DRS, Inc. Profitability — ROE, Margins, and Quality Score
Leonardo DRS, Inc. (DRS) earns a quality factor score of 50/100, indicating solid business quality with consistent operational execution. The return on equity (ROE) is 8.5%, compared to the Technology sector average of -1.4%, which is below typical expectations for high-quality companies. Return on assets (ROA) comes in at 5.2% versus the sector average of -1.0%.
On a margin basis, Leonardo DRS, Inc. reports gross margins of 22.9%, compared to 50.9% for the sector. The operating margin is 8.7% (sector: -0.5%). Net profit margin stands at 6.8%, versus -1.5% for the average Technology stock. Revenue growth is running at 27.5% on a trailing basis, compared to 14.2% for the sector. The overall profitability profile is adequate, though there may be room for margin expansion.
DRS Debt, Balance Sheet, and Financial Health
Leonardo DRS, Inc. has a debt-to-equity ratio of 13.0%, compared to the Technology sector average of 43.0%. The low leverage indicates a conservative balance sheet with significant financial flexibility. The current ratio is 1.89x, suggesting adequate working capital coverage. Total debt on the balance sheet is $348M. Cash and equivalents stand at $309M.
DRS has a beta of 0.92, meaning it is roughly in line with the broader market in terms of price volatility. The stability factor score for Leonardo DRS, Inc. is 60/100, reflecting average volatility within the normal range for its sector.
Leonardo DRS, Inc. Revenue and Earnings History — Quarterly Trend
In TTM 2026, Leonardo DRS, Inc. reported revenue of $3.40B and earnings per share (EPS) of $1.05. Net income for the quarter was $233M. Gross margin was 22.9%. Operating income came in at $297M.
In FY 2025, Leonardo DRS, Inc. reported revenue of $3.65B and earnings per share (EPS) of $1.05. Net income for the quarter was $278M. Gross margin was 23.8%. Revenue grew 12.8% year-over-year compared to FY 2024. Operating income came in at $348M.
In Q3 2025, Leonardo DRS, Inc. reported revenue of $960M and earnings per share (EPS) of $0.27. Net income for the quarter was $72M. Gross margin was 23.1%. Revenue grew 18.2% year-over-year compared to Q3 2024. Operating income came in at $93M.
In Q2 2025, Leonardo DRS, Inc. reported revenue of $829M and earnings per share (EPS) of $0.20. Net income for the quarter was $54M. Gross margin was 23.8%. Revenue grew 10.1% year-over-year compared to Q2 2024. Operating income came in at $70M.
Over the past 8 quarters, Leonardo DRS, Inc. has demonstrated a growth trajectory, with revenue expanding from $753M to $3.40B. Investors analyzing DRS stock should weigh these quarterly trends alongside the valuation and quality metrics discussed above.
DRS Dividend Yield and Income Analysis
Leonardo DRS, Inc. (DRS) currently pays a dividend yield of 0.6%. At this yield, a $10,000 investment in DRS stock would generate approximately $$59.00 in annual dividend income. The net margin of 6.8% provides reasonable coverage for the dividend, though investors should monitor payout sustainability.
DRS Momentum and Technical Analysis Profile
Leonardo DRS, Inc. (DRS) has a momentum factor score of 59/100, reflecting neutral trend characteristics. The stock is neither significantly outperforming nor underperforming the broader market on a momentum basis. The investment factor score is 24/100, which measures capital allocation efficiency and asset growth patterns. The short interest score of 27/100 signals elevated short interest, which can indicate bearish sentiment among institutional investors.
DRS vs Competitors — Technology Sector Ranking and Peer Comparison
Comparing DRS against the S&P 500 benchmark is also instructive for understanding relative performance. Investors can view the full DRS vs S&P 500 (SPY) comparison to assess how Leonardo DRS, Inc. stacks up against the broader market across all factor dimensions.
DRS Next Earnings Date
No upcoming earnings date has been announced for Leonardo DRS, Inc. (DRS) at this time. Check the earnings calendar for the latest scheduling updates across all stocks in our coverage universe.
Should You Buy DRS? — Investment Thesis Summary
Leonardo DRS, Inc. presents a balanced picture with arguments on both sides. Low volatility (stability score 60/100) reduces downside risk.
In summary, Leonardo DRS, Inc. (DRS) earns a Hold rating with a composite score of 48.5/100 as of April 2026. The rating is derived from the Blank Capital Research methodology, which combines six factor dimensions into a single quantitative ranking. Investors should consider these quantitative signals alongside their own fundamental research, risk tolerance, and investment time horizon before making buy or sell decisions on DRS stock.
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Institutional Research Dossier
Leonardo DRS, Inc. (DRS) Deep Dive Analysis
Published on March 24, 2026
Action RatingHold
Sections
Executive Summary
Leonardo DRS (DRS) is currently rated as a Hold, a position we find justifiable given the company's mixed financial performance and valuation. While DRS operates in a strategically important sector with strong growth potential, its current valuation appears to reflect much of this potential, leaving limited upside for investors at the current price. The company's revenue growth is impressive, but its relatively low margins compared to the sector and inconsistent free cash flow generation raise concerns about its ability to translate top-line growth into sustained profitability and shareholder value.
The primary takeaway is that while DRS is a solid player in the defense technology space, its current valuation doesn't offer a compelling risk-reward profile. Investors should closely monitor the company's ability to improve its margins, generate consistent free cash flow, and effectively deploy capital to justify a more bullish outlook. The 'Hold' rating reflects a balanced view, acknowledging the company's strengths while also recognizing its challenges and valuation concerns.
Business Strategy & Overview
Leonardo DRS operates as a defense technology provider, focusing on advanced sensor technologies, network computing and communications, and integrated mission systems. The company's revenue streams are diversified across these three segments, serving the U.S. military, intelligence community, and international military customers. DRS positions itself as a key partner in areas of critical importance to national security, such as electronic warfare, cybersecurity, and force protection, aligning its product development with the U.S. Department of Defense's (DoD) priorities.
The company's strategy involves developing and manufacturing innovative products and solutions for military applications, leveraging its proprietary intellectual property. DRS aims to serve as both a prime contractor and a subcontractor, providing flexibility in its market approach. A key aspect of its strategy is to adapt its technologies for installation on a wide range of military platforms, allowing it to expand revenue opportunities and leverage technology investments. This platform-agnostic approach enhances the resilience of its business model in changing budget environments.
DRS has a significant installed base of products and solutions, which provides opportunities for upgrades and enhancements, contributing to recurring revenue streams. The company's longstanding relationships with the U.S. military and intelligence community are crucial for its growth, enabling it to address emerging needs and generate new business opportunities. The award of the Expedited Active Protection System program and the Initial Maneuver Short-Range Air Defense program highlights its ability to secure key contracts and deliver advanced solutions to the U.S. Army.
The company's focus on high-growth areas within the DoD budget, such as sensing, electronic warfare, and cyber security, has driven its revenue growth in recent years. DRS invests in research and development to maintain its technological edge and address evolving military challenges. The company's quantum cascade laser technology, for example, has potential military and commercial medical applications, demonstrating its commitment to innovation and diversification.
Execution Benchmarks audit
Revenue Growth
YOY expansion rate
27.5%
Sector: 14.2%
+93% VS SCTR
Economic Moat Analysis
Leonardo DRS possesses a narrow economic moat, primarily derived from intangible assets and switching costs. The company's intangible assets include its proprietary intellectual property, specialized knowledge, and established relationships with the U.S. military and intelligence community. These relationships, built over decades, provide DRS with a competitive advantage in securing contracts and understanding customer needs. The company's expertise in areas such as electro-optical sensors, electronic warfare systems, and network computing creates barriers to entry for new competitors.
Switching costs also contribute to DRS's narrow moat. Once the company's products and systems are integrated into military platforms, switching to alternative solutions can be costly and time-consuming. The U.S. military's rigorous testing and certification processes further increase switching costs, making it more likely that customers will continue to use DRS's products and services. The company's installed base of products and solutions provides a recurring revenue stream from upgrades and maintenance, reinforcing its customer relationships.
However, the moat is not wide due to several factors. The defense industry is highly competitive, with numerous large and well-established players. DRS faces competition from companies with greater scale, resources, and technological capabilities. The U.S. government's procurement processes can be complex and unpredictable, and contracts are often subject to competitive bidding. This limits DRS's ability to consistently earn above-average returns on capital.
Furthermore, the rapid pace of technological change in the defense industry poses a threat to DRS's competitive advantage. New technologies and solutions can quickly render existing products obsolete, requiring continuous investment in research and development. The company's ability to maintain its technological edge and adapt to evolving customer needs is crucial for sustaining its moat. While DRS has a history of innovation, it must continue to invest in cutting-edge technologies to remain competitive.
The company's reliance on government contracts also exposes it to political and budgetary risks. Changes in defense spending priorities or political priorities can impact DRS's revenue and profitability. The company's ability to diversify its customer base and expand into new markets is important for mitigating these risks. While DRS has a strong position in certain niche areas, its overall market share in the defense industry is relatively small, limiting its pricing power and bargaining power with customers and suppliers.
Financial Health & Profitability
Leonardo DRS exhibits a mixed financial profile. The company's revenue growth has been impressive, with a 27.5% increase compared to the sector's 14.0%. This growth is evident in the quarterly financial history, with revenue consistently increasing from $569 million in Q1 2023 to $960 million in Q3 FY2025. This indicates strong demand for its products and services and effective execution of its growth strategy. However, the company's gross margin of 22.9% is significantly lower than the sector average of 51.2%, suggesting potential inefficiencies in its cost structure or pricing strategy.
The company's operating margin of 8.7% is also below the sector average of -0.5%, although it is positive, indicating that DRS is generating operating profits while the sector, on average, is not. The net margin of 6.8% is similarly better than the sector average of -1.5%. The trend in operating margin shows improvement over the quarters, from 4.4% in Q1 2023 to 9.7% in Q3 FY2025, suggesting increasing operational efficiency.
DRS's return on equity (ROE) of 8.5% is significantly better than the sector average of -1.5%, indicating that the company is generating positive returns for its shareholders, while the sector, on average, is destroying value. The company's debt-to-equity ratio of 13.00 is much lower than the sector average of 43.00, indicating a conservative capital structure and lower financial risk. The current ratio of 1.89 suggests strong liquidity and the ability to meet its short-term obligations.
However, the company's free cash flow (FCF) generation is a concern. The TTM FCF is only $30.97 million, which is relatively low compared to its market capitalization of $11.65 billion. While the FCF was $176.40 million in FY2024, the lack of quarterly FCF data makes it difficult to assess the consistency of its cash flow generation. The company's EBITDA of $348.00 million suggests strong underlying profitability, but the low FCF indicates that a significant portion of its earnings is being consumed by working capital requirements or capital expenditures.
The company's total debt of $348.00 million is equal to its EBITDA, resulting in a leverage ratio of 1.0x, which is manageable. The company's total cash of $309.00 million provides a buffer against unexpected expenses or investment opportunities. Overall, DRS's financial health is characterized by strong revenue growth, improving margins, and a conservative capital structure, but its low and inconsistent free cash flow generation is a key area of concern.
Valuation Assessment
Leonardo DRS's valuation presents a mixed picture. The company's P/E ratio of 41.7x is slightly below the sector average of 45.3x, suggesting that it is not significantly overvalued compared to its peers. However, a P/E ratio above 40x indicates a premium valuation, reflecting investors' expectations for future growth. The company's EV/EBITDA ratio of 8.6x is significantly lower than the sector average of 13.0x, suggesting that it is undervalued on an enterprise value basis. This could be due to the company's lower debt levels compared to its peers.
Given the company's revenue growth of 27.5%, the P/E ratio of 41.7x appears reasonable, but not necessarily cheap. The PEG ratio (P/E ratio divided by growth rate) would be approximately 1.5, which is generally considered to be fair value. However, the company's low free cash flow generation raises concerns about the sustainability of its earnings growth. If the company is unable to convert its earnings into cash, its valuation may be unsustainable.
The company's market capitalization of $11.65 billion implies a significant premium over its book value, reflecting the value of its intangible assets and growth potential. However, the company's low ROE of 8.5% suggests that it is not generating a high return on its equity. If the company is unable to improve its ROE, its valuation may be difficult to justify.
Compared to its historical valuation, DRS's current P/E ratio is higher than its average P/E ratio over the past few years, reflecting the recent increase in its earnings. However, the company's historical financial performance has been inconsistent, making it difficult to assess its long-term valuation. The company's valuation is also sensitive to changes in interest rates and investor sentiment. An increase in interest rates or a decline in investor confidence could negatively impact its valuation.
Overall, DRS's valuation appears to be fair, but not necessarily attractive. The company's strong revenue growth and improving margins are positive factors, but its low free cash flow generation and relatively low ROE are concerns. Investors should closely monitor the company's ability to improve its financial performance and generate consistent free cash flow to justify its current valuation.
Risk & Uncertainty
Leonardo DRS faces several specific risks and uncertainties that could impact its business and financial performance. One of the primary risks is its reliance on government contracts. Changes in defense spending priorities, budget cuts, or political factors could negatively affect the company's revenue and profitability. The U.S. government's procurement processes can be complex and unpredictable, and contracts are often subject to competitive bidding, which could reduce DRS's margins or result in the loss of key contracts.
Another risk is the intense competition in the defense industry. DRS competes with numerous large and well-established players, some of which have greater scale, resources, and technological capabilities. The company's ability to maintain its technological edge and differentiate its products and services is crucial for its success. Failure to innovate or adapt to evolving customer needs could result in a loss of market share and reduced profitability.
The company's reliance on key suppliers and subcontractors also poses a risk. Disruptions in the supply chain or the failure of a key supplier could negatively impact DRS's ability to deliver its products and services on time and within budget. The company's ability to manage its supply chain effectively is essential for mitigating this risk. The company's international operations expose it to currency fluctuations, political instability, and regulatory changes, which could negatively impact its financial performance.
Cybersecurity risks are also a growing concern for DRS. As a defense technology provider, the company is a potential target for cyberattacks, which could compromise its sensitive data, disrupt its operations, or damage its reputation. The company's ability to protect its systems and data from cyber threats is crucial for maintaining its competitive advantage and customer trust. The company's low short interest of 22/100 suggests that few investors are betting against the stock, but this could change if any of these risks materialize.
Bulls Say / Bears Say
The Bull Case
BULL VIEWLeonardo DRS is well-positioned to benefit from increased defense spending on advanced technologies like electronic warfare and sensors, driving strong revenue growth.
BULL VIEWThe company's focus on high-growth areas within the DoD budget, combined with its strong relationships with the U.S. military, provides a sustainable competitive advantage.
BULL VIEWDRS's improving operating margins and conservative capital structure indicate a path towards increased profitability and shareholder value.
The Bear Case
BEAR VIEWLeonardo DRS's low free cash flow generation raises concerns about its ability to fund future growth and return capital to shareholders.
BEAR VIEWThe company's reliance on government contracts exposes it to political and budgetary risks, which could negatively impact its revenue and profitability.
BEAR VIEWDRS's relatively low gross margins compared to the sector suggest potential inefficiencies in its cost structure and pricing strategy.
About the Author
Marques Blank
Founder & Chief Investment Officer, Blank Capital
Marques brings 15 years of institutional finance and investing experience, having overseen financial planning for a $1.6B defense business unit. He developed the proprietary 6-factor quantitative model used to score DRS and 4,400+ other equities.
Leonardo DRS, Inc. exhibits a 133% valuation premium relative to institutional benchmarks. This represents a potential valuation overextension based on current multiples.
Return on Assets
Efficiency of asset utilization
5.2%
Sector: -1.0%
Gross Margin
Pricing power and cost efficiency
22.9%
Sector: 50.9%
Operating Margin
Core business profitability
8.7%
Sector: -0.5%
Net Margin
Bottom-line profitability
6.8%
Sector: -1.5%
Factor Methodology
The Quality factor evaluates the persistence and magnitude of cash flows. Companies with scores >70 exhibit superior competitive moats and financial resilience through economic cycles.
Sector Avg Yield0.00%
Yield Delta—
Income Projection audit
A $10,000 investment would generate approximately $59 annually in dividends at the current trailing rate.
