3 Defense And Aerospace Stocks With Earnings Growth And Valuation Risks

Ukraine’s expanding use of mid and long range drones, Russian production bottlenecks, and pressure on energy and logistics routes are reshaping how investors think about defense and aerospace stocks tied to this conflict. For some companies, higher demand for equipment and support services may be a clear positive, while for others the risks to supply chains and budgets may be harder to quantify. This article breaks down how these cross currents link back to real businesses and discusses 3 stocks from our Defense and Aerospace Sector Stocks screener that appear especially exposed to the latest headlines.

Overview: Atlas Copco is a Swedish industrial group that supplies compressors, vacuum systems, power tools, machine vision, and mobile power equipment that factories, semiconductor plants, aerospace companies, and construction crews rely on to run critical processes around the world.

Operations: Atlas Copco generates most of its revenue from Compressor Technique at about SEK 76.5b, followed by Vacuum Technique at about SEK 36.9b, Power Technique at about SEK 29.0b, and Industrial Technique at about SEK 27.0b, with a small segment adjustment of SEK 0.9b.

Market Cap: SEK919.6b

Investors looking at defense related supply chains may consider Atlas Copco because its compressors, vacuum systems, and tools are used in many aerospace, semiconductor, and industrial plants. These end markets may experience steadier demand as governments and manufacturers prioritize energy efficiency, automation, and production resilience. Analyst forecasts indicate revenue and earnings growth supported by a growing, higher margin service and aftermarket business. At the same time, the stock trades on a higher P/E than many Swedish machinery peers, so expectations are elevated. Currency swings, softer large order demand, and geopolitical frictions on trade and tariffs all add risk. A central consideration for investors is whether Atlas Copco’s pricing power, technology, and global footprint will be sufficient to support these expectations over time.

Atlas Copco’s premium P/E only makes sense if the service heavy model really supports future earnings, so it is worth scanning the analyst forecasts for Atlas Copco to see what might be hiding behind those expectations.

Overview: Credo Technology Group Holding develops high speed chips, cables, optical modules, and licensed IP that move large amounts of data efficiently for Ethernet and PCIe connections in data centers and advanced computing systems.

Operations: Credo generates about US$1.3b of revenue entirely from semiconductors, with sales spread across the United States, Hong Kong, Taiwan, Mainland China, and other international markets.

Market Cap: US$50.7b

Credo Technology Group stands out in the Defense and Aerospace Sector Stocks screener because its high speed connectivity products sit at the heart of AI data centers, cloud infrastructure, and potentially defense systems where reliable data flows for drones and sensor networks are crucial. Earnings growth has been very large, margins have widened to 35.4%, and revenue is expected to keep growing above 20% a year, which helps explain why the stock carries a premium P/E and trades above one widely used cash flow estimate of value. The flip side is real risk from funding structure, share price volatility, customer concentration, and recent insider selling. The key question for investors is whether that rapid growth and expanding optical business truly compensates for the richer valuation and execution risks that come with it.

Credo’s rapid earnings growth and 35.4% margins could signal an AI infrastructure story that the market has not fully priced. However, the real twist may sit inside the analyst forecasts for Credo Technology Group Holding

Overview: Fujikura is a Tokyo based manufacturer of optical fiber, communication and power cables, electronic components, and automotive wire harnesses that sit behind telecom networks, data centers, vehicles, and industrial power systems worldwide.

Operations: Fujikura generates most of its revenue from the Information and communications business division at ¥653,172m, Electronics Business Unit at ¥172,870m, Automotive Products Business Division at ¥179,370m, and Energy Business Unit at ¥158,441m, with smaller contributions from Real Estate at ¥11,032m and Others at ¥9,691m.

Market Cap: ¥8.5t

Fujikura gives you exposure to the backbone of modern defense and aerospace systems, from optical fiber and communication cables to automotive and power wiring that can be critical for radar, drones, and secure data links. Analysts expect earnings growth of about 18.8% a year and revenue growth of 12.4% a year, paired with a 13.3% net margin and 27.3% ROE. This helps explain why the stock trades on a 54.4x P/E and well above one cash flow based value estimate. However, this growth story comes with a highly volatile share price, heavy reliance on external borrowing, and a board still bedding in. The key question is whether Fujikura’s role in communication infrastructure justifies those higher expectations and risks over time.

Fujikura’s high growth forecasts, 27.3% ROE, and 54.4x P/E suggest a story still forming, but the real tension is whether expectations outpace reality, which starts inside the analyst forecasts for Fujikura

The three stocks in this article are only a starting point, with the full Defense and Aerospace Sector Stocks screener surfacing 280 more companies that may have equally compelling defense and aerospace narratives tied to energy security, data infrastructure, and advanced systems. Use Simply Wall St to identify and analyze the specific catalysts, risk profiles, and business narratives that matter most to you so you can focus on the highest conviction opportunities across that broader universe.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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