MW Boeing's stock stands out in this screen of aerospace and defense investments
By Philip van Doorn
Several of the largest defense contractors trade at low price/sales ratios when compared with that of the S&P 500, and Boeing has a high projected sales growth rate
Boeing is expected to increase its revenue at a much higher rate than the S&P 500 over the next two years, while its stock trades at a much lower forward price/sales ratio than that of the index.
The start of a major regional conflict will cause some investors to react immediately. Stocks of U.S.-listed aerospace and defense companies had already soared heading into the weekend and could hardly be considered cheap when looking at customary forward price/earnings ratios, but some of the largest industry players' stocks are inexpensively priced on a forward price/sales basis.
Read: Palantir, Lockheed and these other defense stocks are rising on heels of Iran conflict
So before we dive into this industry group, it never hurts to be reminded of this old bit of stock-market wisdom from Benjamin Graham, which Berkshire Hathaway's Warren Buffett cited repeatedly, including in his 2017 letter to shareholders: "In the short run, the market is a voting machine; in the long run, however, it becomes a weighing machine." Even if you think the timing is right to invest in the aerospace and defense industry, it might be best to think of this as a multiyear play.
In early trading on Monday, shares of Lockheed Martin (LMT) - the primary contractor for the F-35 Lightning II - were up 4%, even as the Dow Jones Industrial Average DJIA and the S&P 500 SPX showed declines.
Through Friday, the $8.2 billion Invesco Aerospace & Defense exchange-traded fund PPA was up 16% for 2026, while the State Street SPDR S&P 500 ETF Trust SPY was up only 1% for 2026. Last year, PPA rose 37% while SPY rose 18%. Those are total returns with dividends reinvested, with data supplied by LSEG.
The Invesco Aerospace & Defense ETF's portfolio includes 61 stocks weighted by market capitalization, which means Lockheed makes up 9.1% of the portfolio. Adding RTX $(RTX)$, GE Aerospace $(GE)$, Boeing $(BA)$ and Northrop Grumman $(NOC)$, the fund's top five holdings make up 40.3% of the portfolio, reflecting the concentrated nature of the government aerospace-contracting industry.
The forward price/earnings ratio for the PPA portfolio is 31.7, according to LSEG. This is based on the component companies' share prices and consensus earnings-per-share estimates among analysts working for brokerage and research firms polled by LSEG, weighted by market cap. On the same basis, the S&P 500's forward P/E is 21.6.
So the large U.S. defense stocks, as a group, can be considered to be expensive, but investors will pay more for rapid sales growth. And when considering the wear and tear on hardware and the depletion of munitions from a conflict such as the U.S. attack on Iran, which was expected - not to mention the supplying of various types of equipment to Ukraine as it defends itself from Russia's invasion - it is no surprise to see that these stocks have moved up so much.
From the archives (August 2025): Aerospace and defense stocks are hot. These 10 companies are expected to show the fastest sales growth.
Screening aerospace and defense stocks
For investors who want to consider individual aerospace and defense stocks for long-term investments, it might help to take a top-down look at valuations and growth expectations for the group.
There are only 12 A&D stocks in the S&P 500 SPX, but there are 25 in the S&P Composite 1500 Index XX:SP1500, which is made up of the S&P 500, the S&P MidCap 400 Index MID and the S&P Small Cap 600 Index SML.
Consensus sales estimates through 2027 are available from LSEG for 23 of these companies.
So we are listing all 23, sorted by projected compound annual growth rate from 2025 through 2027, based on consensus estimates among analysts polled by LSEG. These are calendar-year estimates, as adjusted by the data provider for companies whose fiscal reporting periods don't match the calendar.
Despite some high P/Es, the stories are different for each company. A company with a high P/E may be in the midst of a multiyear cycle of rapid revenue growth. So we are also including forward price/sales ratios. On that basis, many of the largest A&D players are inexpensively priced relative to the S&P 500's forward price/sales valuation of 3.2, according to LSEG's data.
Company Two-year projected sales CAGR through 2027 Forward P/E Forward price/sales Axon Enterprise 28.5% 63.0 11.7 AeroVironment 27.0% 57.5 5.5 Kratos Defense & Security Solutions 23.2% 98.9 9.3 BWX Technologies 13.3% 43.5 5.0 Howmet Aerospace 12.2% 54.2 11.2 GE Aerospace 11.9% 44.3 7.4 Boeing 11.6% 138.0 1.8 Hexcel 10.9% 37.4 3.3 AAR 10.5% 21.9 1.4 Woodward 10.2% 41.5 5.4 TransDigm Group 10.1% 30.8 7.1 ATI 8.4% 37.3 4.4 Mercury Systems 7.7% 65.8 5.3 Curtiss-Wright 7.5% 45.4 6.8 StandardAero 7.3% 20.7 1.6 L3Harris Technologies 7.3% 30.2 2.9 Parsons 6.3% 19.5 1.0 RTX 6.0% 28.9 2.9 Northrop Grumman 5.3% 25.5 2.3 Lockheed Martin 5.2% 21.6 1.9 Huntington Ingalls Industries 4.9% 24.3 1.3 Textron 4.7% 14.8 1.1 General Dynamics 4.3% 21.3 1.8 Source: LSEG
Click on the tickers for more about each company, including news coverage, charts, financials and analysts' consensus ratings and price targets.
Read: Tomi Kilgore's detailed guide to the information available on the MarketWatch quote page
For comparison, the projected two-year revenue CAGR for the S&P 500 through 2027 is 8%.
Topping the list is Axon Enterprise (AXON), which makes Tasers and other connected systems, including body cameras, that are used by law enforcement, including federal agencies. The company was featured in this recent screen of industrial stocks.
Among the largest five components of PPA, GE Aerospace and Boeing trade at high P/E ratios, with Boeing in the midst of a multiyear turnaround effort. But both of these companies are pretty high on the list as sorted by projected sales CAGR. And Boeing really stands out with the combination of a high expected sales growth pace and a low forward price/sales ratio of 1.8, compared with 3.2 for the S&P 500.
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Lockheed's forward P/E matched that of the S&P 500 at Friday's close, and the projected sales CAGR of 5.2% was considerably lower than that of the S&P 500. The type of major government contracts that Lockheed seeks to land can be years in the making, but the stock trades at a low forward price/sales ratio of 1.9.
Meanwhile, RTX, Northrop Grumman and General Dynamics (GD) are low on the list by projected sales growth but trade at price/sales ratios below that of the S&P 500.
In emailed comments on Monday, Tony Bancroft, a portfolio manager with Gabelli, noted that there were reports that more than 100 Tomahawk cruise missiles were launched on the first day of the attack on Iran by the U.S. and Israel. These missiles are made by RTX. "With roughly 4,000 in the U.S. arsenal, that level of usage underscores the likelihood of increased replenishment, production, and defense spending going forward," Bancroft wrote.
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March 02, 2026 11:54 ET (16:54 GMT)
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