Leonardo DRS has gotten torched over the last six months - since June 2025, its stock price has dropped 25.8% to $34.50 per share. This might have investors contemplating their next move.
Following the pullback, is this a buying opportunity for DRS? Find out in our full research report, it’s free for active Edge members.
Why Does Leonardo DRS Spark Debate?
Developing submarine detection systems for the U.S. Navy, Leonardo DRS (NASDAQ:DRS) is a provider of defense systems, electronics, and military support services.
Two Things to Like:
1. Surging Backlog Locks In Future Sales
We can better understand Defense Contractors companies by analyzing their backlog. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into Leonardo DRS’s future revenue streams.
Leonardo DRS’s backlog punched in at $8.91 billion in the latest quarter, and over the last two years, its year-on-year growth averaged 44.8%. This performance was fantastic and shows the company has a robust sales pipeline because it is accumulating more orders than it can fulfill. Its growth also suggests that customers are committing to Leonardo DRS for the long term, enhancing the business’s predictability. 
2. EPS Surges Higher Over the Last Two Years
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Leonardo DRS’s EPS grew at an astounding 19.5% compounded annual growth rate over the last two years, higher than its 14.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
One Reason to be Careful:
New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Leonardo DRS’s ROIC has decreased over the last few years. Only time will tell if its new bets can bear fruit and potentially reverse the trend.
Final Judgment
Leonardo DRS’s positive characteristics outweigh the negatives. After the recent drawdown, the stock trades at 29.2× forward P/E (or $34.50 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
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