10 Best Defense Systems for February 2026

10 Best Defense Systems for February 2026

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Market Overview & Selection Criteria

The defense and aerospace sector has shown resilience amid geopolitical tensions and increased government spending on national security, creating opportunities in stock picks focused on undervalued companies. ValueSense selected these top 10 defense stocks using intrinsic value calculations, quality ratings, revenue growth, free cash flow margins, ROIC, and debt metrics from proprietary analysis. Stocks were prioritized for strong 1Y returns, high gross margins, and potential undervaluation where intrinsic value suggests upside, providing a stock watchlist for retail investors analyzing best value stocks in defense systems, aviation, and related tech.

Stock #1: Palantir Technologies Inc. (PLTR)

MetricValue
Market Cap$349.5B
Quality Rating8.1
Intrinsic Value$20.3
1Y Return80.5%
Revenue$3,896.2M
Free Cash Flow$1,794.8M
Revenue Growth47.2%
FCF margin46.1%
Gross margin80.8%
ROIC76.6%
Total Debt to Equity3.5%

Investment Thesis

Palantir Technologies Inc. (PLTR) stands out in the defense tech space with a Quality rating of 8.1, the highest in this watchlist, driven by exceptional financial metrics including Revenue of $3,896.2M and Revenue growth of 47.2%. The company's Free Cash Flow reached $1,794.8M with an impressive FCF margin of 46.1% and Gross margin of 80.8%, supported by a stellar ROIC of 76.6%. With a Market Cap of $349.5B and minimal Total Debt to Equity at 3.5%, PLTR demonstrates robust balance sheet strength. Its 1Y Return of 80.5% reflects market recognition of its data analytics platforms critical for defense applications, though the Intrinsic value of $20.3 indicates potential overvaluation relative to fundamentals for long-term analysis.

This positions PLTR as a high-growth leader in PLTR analysis, blending software efficiency with defense contracts for sustained profitability.

Key Catalysts

  • Explosive 47.2% Revenue growth fueling expansion in AI-driven defense solutions.
  • Superior 80.8% Gross margin and 46.1% FCF margin enabling reinvestment.
  • Top 76.6% ROIC signaling efficient capital use.
  • Low 3.5% Total Debt to Equity reducing financial risk.

Risk Factors

  • Intrinsic value at $20.3 may signal limited near-term upside if growth slows.
  • High Market Cap of $349.5B exposes it to valuation volatility in tech selloffs.
  • Dependence on government contracts could face budget uncertainties.
PLTR Analysis

Stock #2: RTX Corporation (RTX)

MetricValue
Market Cap$267.8B
Quality Rating6.7
Intrinsic Value$135.6
1Y Return56.6%
Revenue$88.6B
Free Cash Flow$7,940.0M
Revenue Growth9.7%
FCF margin9.0%
Gross margin20.1%
ROIC5.8%
Total Debt to Equity61.2%

Investment Thesis

RTX Corporation (RTX), a defense giant, features a Market Cap of $267.8B and Quality rating of 6.7, with Revenue of $88.6B and Free Cash Flow of $7,940.0M. Revenue growth stands at 9.7%, complemented by a 9.0% FCF margin, 20.1% Gross margin, and 5.8% ROIC. The Intrinsic value of $135.6 suggests undervaluation potential, backed by a solid 1Y Return of 56.6%, despite Total Debt to Equity at 61.2%. RTX's portfolio in missiles, radar, and aircraft systems positions it well for steady RTX analysis in the aerospace sector.

Key Catalysts

  • Massive $88.6B Revenue base with consistent 9.7% growth.
  • Strong $7,940.0M Free Cash Flow supporting dividends and buybacks.
  • 56.6% 1Y Return highlighting market confidence.
  • Intrinsic value $135.6 indicating room for appreciation.

Risk Factors

  • Elevated 61.2% Total Debt to Equity amid rising interest rates.
  • Modest 5.8% ROIC compared to peers like PLTR.
  • 9.0% FCF margin vulnerable to supply chain disruptions.
RTX Value Analysis

Stock #3: The Boeing Company (BA)

MetricValue
Market Cap$177.3B
Quality Rating5.5
Intrinsic Value$267.8
1Y Return30.2%
Revenue$89.5B
Free Cash Flow$1,492.0M
Revenue Growth34.5%
FCF margin1.7%
Gross margin4.8%
ROIC(5.2%)
Total Debt to Equity991.4%

Investment Thesis

The Boeing Company (BA) holds a Market Cap of $177.3B with a Quality rating of 5.5, generating Revenue of $89.5B and Revenue growth of 34.5%. Free Cash Flow is $1,492.0M at a 1.7% FCF margin, with Gross margin at 4.8% and negative ROIC of 5.2%. Extreme Total Debt to Equity of 991.4% flags leverage concerns, but 1Y Return of 30.2% and Intrinsic value of $267.8 point to recovery potential in commercial and defense aviation for BA stock analysis.

Key Catalysts

  • Robust 34.5% Revenue growth from production ramps.
  • High Intrinsic value $267.8 suggesting significant upside.
  • Large $89.5B Revenue scale in aircraft manufacturing.
  • Improving 30.2% 1Y Return post-challenges.

Risk Factors

  • Negative 5.2% ROIC indicating capital inefficiency.
  • Sky-high 991.4% Total Debt to Equity risking solvency.
  • Low 1.7% FCF margin and 4.8% Gross margin pressuring margins.
BA Intrinsic Analysis

Stock #4: Lockheed Martin Corporation (LMT)

MetricValue
Market Cap$145.2B
Quality Rating6.1
Intrinsic Value$842.7
1Y Return39.0%
Revenue$75.1B
Free Cash Flow$6,908.0M
Revenue Growth5.7%
FCF margin9.2%
Gross margin10.2%
ROIC26.5%
Total Debt to Equity322.9%

Investment Thesis

Lockheed Martin Corporation (LMT) boasts a Market Cap of $145.2B and Quality rating of 6.1, with Revenue of $75.1B, Free Cash Flow of $6,908.0M, and 5.7% Revenue growth. Metrics include 9.2% FCF margin, 10.2% Gross margin, strong 26.5% ROIC, and Intrinsic value of $842.7, despite 322.9% Total Debt to Equity and 39.0% 1Y Return. This makes LMT a cornerstone for LMT analysis in fighter jets and missiles.

Key Catalysts

  • Excellent 26.5% ROIC for capital returns.
  • Solid $6,908.0M Free Cash Flow.
  • Attractive Intrinsic value $842.7.
  • Reliable 39.0% 1Y Return.

Risk Factors

  • High 322.9% Total Debt to Equity.
  • Slow 5.7% Revenue growth.
  • Defense budget dependencies.
LMT Stock Analysis

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Stock #5: Northrop Grumman Corporation (NOC)

MetricValue
Market Cap$97.8B
Quality Rating5.7
Intrinsic Value$841.8
1Y Return43.9%
Revenue$42.0B
Free Cash Flow$3,307.0M
Revenue Growth2.2%
FCF margin7.9%
Gross margin19.8%
ROIC8.4%
Total Debt to Equity118.4%

Investment Thesis

Northrop Grumman Corporation (NOC) has a Market Cap of $97.8B, Quality rating 5.7, Revenue $42.0B, and 2.2% Revenue growth. Free Cash Flow is $3,307.0M (7.9% FCF margin), Gross margin 19.8%, ROIC 8.4%, Intrinsic value $841.8, 1Y Return 43.9%, and Total Debt to Equity 118.4%. NOC excels in stealth tech for NOC analysis.

Key Catalysts

  • Strong 43.9% 1Y Return.
  • High Intrinsic value $841.8.
  • Stable $3,307.0M Free Cash Flow.
  • Solid 19.8% Gross margin.

Risk Factors

  • Low 2.2% Revenue growth.
  • 118.4% Total Debt to Equity.
  • Moderate 8.4% ROIC.
NOC Fundamental Analysis

Stock #6: General Dynamics Corporation (GD)

MetricValue
Market Cap$94.5B
Quality Rating5.9
Intrinsic Value$489.6
1Y Return36.6%
Revenue$52.6B
Free Cash Flow$3,959.0M
Revenue Growth10.1%
FCF margin7.5%
Gross margin2.8%
ROIC10.4%
Total Debt to Equity31.3%

Investment Thesis

General Dynamics Corporation (GD) features Market Cap $94.5B, Quality rating 5.9, Revenue $52.6B, 10.1% Revenue growth, Free Cash Flow $3,959.0M (7.5% FCF margin), low 2.8% Gross margin, 10.4% ROIC, Intrinsic value $489.6, 36.6% 1Y Return, and 31.3% Total Debt to Equity. GD offers diversification in submarines and IT for GD analysis.

Key Catalysts

  • Healthy 10.1% Revenue growth.
  • Robust $3,959.0M Free Cash Flow.
  • Manageable 31.3% Total Debt to Equity.
  • Steady 36.6% 1Y Return.

Risk Factors

  • Thin 2.8% Gross margin.
  • Intrinsic value $489.6 vs. peers.
  • Sector contract risks.
GD Value Check

Stock #7: Howmet Aerospace Inc. (HWM)

MetricValue
Market Cap$84.1B
Quality Rating7.2
Intrinsic Value$74.7
1Y Return63.5%
Revenue$7,975.0M
Free Cash Flow$1,058.0M
Revenue Growth9.7%
FCF margin13.3%
Gross margin22.6%
ROIC18.4%
Total Debt to Equity62.0%

Investment Thesis

Howmet Aerospace Inc. (HWM) shows Market Cap $84.1B, Quality rating 7.2, Revenue $7,975.0M, 9.7% Revenue growth, Free Cash Flow $1,058.0M (13.3% FCF margin), 22.6% Gross margin, 18.4% ROIC, Intrinsic value $74.7, and 63.5% 1Y Return with 62.0% Total Debt to Equity. Strong in engine components for HWM analysis.

Key Catalysts

  • High 63.5% 1Y Return.
  • Impressive 18.4% ROIC.
  • Solid 13.3% FCF margin.
  • 7.2 Quality rating.

Risk Factors

  • Intrinsic value $74.7 potential overvalue.
  • 62.0% Total Debt to Equity.
  • Aerospace cyclicality.
HWM Analysis

Stock #8: L3Harris Technologies, Inc. (LHX)

MetricValue
Market Cap$64.1B
Quality Rating5.8
Intrinsic Value$343.5
1Y Return62.6%
Revenue$21.9B
Free Cash Flow$2,682.0M
Revenue Growth2.5%
FCF margin12.3%
Gross margin24.1%
ROIC6.1%
Total Debt to Equity0.0%

Investment Thesis

L3Harris Technologies, Inc. (LHX) has Market Cap $64.1B, Quality rating 5.8, Revenue $21.9B, 2.5% Revenue growth, Free Cash Flow $2,682.0M (12.3% FCF margin), 24.1% Gross margin, 6.1% ROIC, Intrinsic value $343.5, 62.6% 1Y Return, and 0.0% Total Debt to Equity. Debt-free strength aids LHX analysis.

Key Catalysts

  • Zero Total Debt to Equity.
  • Strong 62.6% 1Y Return.
  • Healthy 12.3% FCF margin.
  • High Intrinsic value $343.5.

Risk Factors

  • Slow 2.5% Revenue growth.
  • Moderate 6.1% ROIC.
  • Integration risks.
LHX Stock Review

Stock #9: HEICO Corporation (HEI)

MetricValue
Market Cap$45.8B
Quality Rating7.1
Intrinsic Value$105.4
1Y Return39.0%
Revenue$4,485.0M
Free Cash Flow$861.4M
Revenue Growth16.3%
FCF margin19.2%
Gross margin41.1%
ROIC11.7%
Total Debt to Equity44.7%

Investment Thesis

HEICO Corporation (HEI) offers Market Cap $45.8B, Quality rating 7.1, Revenue $4,485.0M, 16.3% Revenue growth, Free Cash Flow $861.4M (19.2% FCF margin), 41.1% Gross margin, 11.7% ROIC, Intrinsic value $105.4, and 39.0% 1Y Return with 44.7% Total Debt to Equity. Aftermarket parts drive HEI analysis.

Key Catalysts

  • Excellent 41.1% Gross margin.
  • Strong 16.3% Revenue growth.
  • High 19.2% FCF margin.
  • Solid 7.1 Quality rating.

Risk Factors

  • Intrinsic value $105.4 vs. growth.
  • 44.7% Total Debt to Equity.
  • Niche market exposure.
HEI Fundamental Analysis

Stock #10: Axon Enterprise, Inc. (AXON)

MetricValue
Market Cap$38.9B
Quality Rating5.8
Intrinsic Value$58.4
1Y Return-26.0%
Revenue$2,558.0M
Free Cash Flow$145.0M
Revenue Growth31.8%
FCF margin5.7%
Gross margin60.3%
ROIC2.9%
Total Debt to Equity69.4%

Investment Thesis

Axon Enterprise, Inc. (AXON) has Market Cap $38.9B, Quality rating 5.8, Revenue $2,558.0M, 31.8% Revenue growth, Free Cash Flow $145.0M (5.7% FCF margin), 60.3% Gross margin, 2.9% ROIC, Intrinsic value $58.4, negative -26.0% 1Y Return, and 69.4% Total Debt to Equity. TASER and body cams fuel growth in AXON analysis.

Key Catalysts

  • High 31.8% Revenue growth.
  • Strong 60.3% Gross margin.
  • Expansion in public safety tech.
  • Recovery potential post-dip.

Risk Factors

  • Negative -26.0% 1Y Return.
  • Low $145.0M Free Cash Flow.
  • 69.4% Total Debt to Equity.
  • Weak 2.9% ROIC.
AXON Value Analysis

Portfolio Diversification Insights

These top 10 defense stocks cluster in aerospace and defense, with PLTR adding tech diversification, RTX/BA/LMT/NOC/GD/LHX as core primes, HWM/HEI in components, and AXON in enforcement tech. Sector allocation: 70% pure defense/aerospace, 20% suppliers, 10% adjacencies. High ROIC names like PLTR 76.6% complement steady cash flow generators like RTX ($7.94B FCF), reducing volatility. Low-debt LHX 0% balances high-leverage BA 991.4%, creating a resilient stock watchlist for undervalued stocks to buy in defense.

Market Timing & Entry Strategies

Consider entry during defense budget cycles or post-earnings dips, monitoring ROIC and FCF trends. Dollar-cost average into high Intrinsic value names like LMT $842.7 or NOC $841.8 on pullbacks, pairing with growth like AXON (31.8% revenue). Track geopolitical events boosting sector demand; use ValueSense tools for real-time investment opportunities analysis.

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FAQ Section

How were these stocks selected?
ValueSense analyzed Quality rating, Intrinsic value, revenue growth, FCF margins, ROIC, and debt ratios to curate this defense stock watchlist focusing on undervalued opportunities.

What's the best stock from this list?
PLTR leads with 8.1 Quality rating, 80.5% 1Y Return, and 76.6% ROIC, though "best" depends on risk tolerance in PLTR analysis.

Should I buy all these stocks or diversify?
Diversify across primes (RTX, LMT), suppliers (HWM, HEI), and tech (PLTR, AXON) for balanced portfolio diversification insights rather than concentrating.

What are the biggest risks with these picks?
High debt (BA 991.4%, LMT 322.9%), slow growth in some (NOC 2.2%), and contract reliance pose key concerns alongside market volatility.

When is the best time to invest in these stocks?
Target geopolitical escalations, Q4 budget approvals, or dips below Intrinsic value thresholds, using ongoing market timing via ValueSense metrics.