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Intrinsic Value of Leonardo DRS, Inc. (DRS)

Previous Close$47.57
Intrinsic Value
Upside potential
Previous Close
$47.57

VALUATION INPUT DATA

This valuation is based on fiscal year data as of 2024 and quarterly data as of .

Data is not available at this time.

Stock Valuation Context

Business Model And Market Position

Leonardo DRS, Inc. operates as a leading defense technology provider, specializing in advanced sensing, network computing, force protection, and electric power and propulsion systems. The company serves primarily the U.S. Department of Defense and allied international governments, leveraging its expertise in mission-critical solutions. Its revenue model is anchored in long-term defense contracts, R&D partnerships, and aftermarket services, ensuring stable cash flows and recurring revenue streams. DRS holds a strong position in the defense electronics and integrated systems sector, competing with established players like Lockheed Martin and Raytheon. Its niche focus on next-generation technologies, such as AI-enabled sensing and hybrid electric propulsion, differentiates it in a highly regulated and innovation-driven industry. The company benefits from sustained defense spending trends, particularly in modernization programs, while maintaining a diversified portfolio to mitigate project-specific risks.

Revenue Profitability And Efficiency

In FY 2024, Leonardo DRS reported revenue of $3.23 billion, with net income of $213 million, reflecting a net margin of approximately 6.6%. Diluted EPS stood at $0.80, supported by disciplined cost management. Operating cash flow was robust at $271 million, though capital expenditures of $85 million indicate ongoing investments in R&D and infrastructure. The company’s efficiency metrics align with industry peers, balancing growth and profitability.

Earnings Power And Capital Efficiency

DRS demonstrates solid earnings power, with operating cash flow covering capital expenditures by a factor of 3.2x. The absence of dividends suggests reinvestment in high-return projects, particularly in defense tech innovation. The company’s capital efficiency is evident in its ability to generate cash while maintaining a lean balance sheet, though further details on ROIC would provide deeper insight into long-term value creation.

Balance Sheet And Financial Health

The company maintains a strong liquidity position, with $598 million in cash and equivalents against total debt of $458 million, yielding a net cash position. This conservative leverage profile provides flexibility for strategic acquisitions or organic growth. The balance sheet reflects a focus on stability, with no immediate refinancing risks and ample capacity to navigate cyclical defense budget fluctuations.

Growth Trends And Dividend Policy

DRS’s growth is tied to U.S. and allied defense budgets, with a focus on electrification and AI-driven systems. The company does not currently pay dividends, prioritizing reinvestment in technology and contract bidding. Historical revenue trends suggest mid-single-digit growth, though geopolitical tensions could accelerate demand for its niche offerings in the medium term.

Valuation And Market Expectations

At a diluted EPS of $0.80, the stock’s valuation hinges on defense sector multiples and future contract wins. Market expectations likely factor in steady margin expansion and backlog growth, though geopolitical risks and budget approvals remain key variables. Comparables analysis would benefit from clearer segment-level disclosures.

Strategic Advantages And Outlook

DRS’s strategic advantages include its focus on high-margin, proprietary technologies and entrenched relationships with defense agencies. The outlook is positive, driven by global defense spending tailwinds, but contingent on execution in R&D and competitive bidding. Long-term success depends on maintaining technological leadership in an evolving threat landscape.

Sources

Company filings (CIK: 0001833756), FY 2024 preliminary data

show cash flow forecast

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

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