10 Best Defensetech for February 2026
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Market Overview & Selection Criteria
The defense technology sector is experiencing steady demand driven by global geopolitical tensions and increased government spending on national security. ValueSense analysis highlights companies with strong intrinsic value potential, focusing on metrics like Quality rating, ROIC, revenue growth, and FCF margins to identify undervalued opportunities in aerospace, defense contracting, and related tech. These top 10 defense tech stock picks were selected based on comprehensive evaluation of market cap, profitability indicators, and alignment with long-term sector growth, emphasizing firms showing robust financial health despite varying debt levels. This watchlist prioritizes educational analysis of undervalued stocks in defense tech for retail investors building diversified portfolios.
Featured Stock Analysis
Stock #1: Palantir Technologies Inc. (PLTR)
| Metric | Value |
|---|---|
| Market Cap | $349.5B |
| Quality Rating | 8.1 |
| Intrinsic Value | $20.3 |
| 1Y Return | 80.5% |
| Revenue | $3,896.2M |
| Free Cash Flow | $1,794.8M |
| Revenue Growth | 47.2% |
| FCF margin | 46.1% |
| Gross margin | 80.8% |
| ROIC | 76.6% |
| Total Debt to Equity | 3.5% |
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, supported by exceptional ROIC of 76.6% and gross margin of 80.8%. Despite a current price implied above its intrinsic value of $20.3, the company's revenue of $3,896.2M reflects 47.2% revenue growth, paired with FCF of $1,794.8M and an impressive FCF margin of 46.1%. Low Total Debt to Equity at 3.5% underscores financial stability, making PLTR a compelling case for analysis in data-driven defense applications. Its 1Y Return of 80.5% highlights momentum, positioning it as a leader among defense tech stock picks with scalable software platforms.
Key Catalysts
- Explosive 47.2% revenue growth fueling expansion in government contracts.
- Superior 76.6% ROIC indicating efficient capital use.
- High 46.1% FCF margin supporting reinvestment and shareholder returns.
- Minimal 3.5% debt-to-equity for low leverage risk.
Risk Factors
- Potential overvaluation relative to $20.3 intrinsic value.
- Dependence on volatile government spending cycles.
- High market cap of $349.5B may limit short-term upside.
Stock #2: RTX Corporation (RTX)
| Metric | Value |
|---|---|
| Market Cap | $267.8B |
| Quality Rating | 6.7 |
| Intrinsic Value | $135.6 |
| 1Y Return | 56.6% |
| Revenue | $88.6B |
| Free Cash Flow | $7,940.0M |
| Revenue Growth | 9.7% |
| FCF margin | 9.0% |
| Gross margin | 20.1% |
| ROIC | 5.8% |
| Total Debt to Equity | 61.2% |
Investment Thesis
RTX Corporation (RTX) offers a balanced profile in defense with a Market Cap of $267.8B and Quality rating of 6.7. Key metrics include revenue of $88.6B, 9.7% revenue growth, and solid FCF of $7,940.0M at a 9.0% FCF margin. ROIC stands at 5.8%, with gross margin of 20.1% and Total Debt to Equity of 61.2%, suggesting manageable leverage in a capital-intensive sector. The 1Y Return of 56.6% and intrinsic value of $135.6 provide a foundation for RTX stock analysis, appealing to those tracking established aerospace and missile systems leaders.
Key Catalysts
- Strong $7,940.0M FCF enabling R&D and dividends.
- Steady 9.7% revenue growth from defense contracts.
- 56.6% 1Y Return reflecting market confidence.
- Diverse revenue streams in missiles and aircraft.
Risk Factors
- Moderate 61.2% debt-to-equity amid rising interest rates.
- Lower 5.8% ROIC compared to tech peers.
- Exposure to supply chain disruptions.
Stock #3: The Boeing Company (BA)
| Metric | Value |
|---|---|
| Market Cap | $177.3B |
| Quality Rating | 5.5 |
| Intrinsic Value | $267.8 |
| 1Y Return | 30.2% |
| Revenue | $89.5B |
| Free Cash Flow | $1,492.0M |
| Revenue Growth | 34.5% |
| FCF margin | 1.7% |
| Gross margin | 4.8% |
| ROIC | (5.2%) |
| Total Debt to Equity | 991.4% |
Investment Thesis
The Boeing Company (BA) presents turnaround potential with 34.5% revenue growth to $89.5B and a Market Cap of $177.3B, though its Quality rating is 5.5. FCF of $1,492.0M yields a low 1.7% FCF margin, gross margin of 4.8%, and negative ROIC of 5.2%, offset by an intrinsic value of $267.8 suggesting undervaluation. Extreme Total Debt to Equity at 991.4% flags caution, but 30.2% 1Y Return indicates recovery momentum in commercial and defense aviation for BA stock picks.
Key Catalysts
- Robust 34.5% revenue growth post-recovery.
- High $267.8 intrinsic value vs. current pricing.
- Large-scale defense programs like fighter jets.
- Improving $89.5B revenue base.
Risk Factors
- Sky-high 991.4% debt-to-equity straining balance sheet.
- Negative 5.2% ROIC signaling inefficiency.
- Ongoing regulatory and production issues.
Stock #4: Lockheed Martin Corporation (LMT)
| Metric | Value |
|---|---|
| Market Cap | $145.2B |
| Quality Rating | 6.1 |
| Intrinsic Value | $842.7 |
| 1Y Return | 39.0% |
| Revenue | $75.1B |
| Free Cash Flow | $6,908.0M |
| Revenue Growth | 5.7% |
| FCF margin | 9.2% |
| Gross margin | 10.2% |
| ROIC | 26.5% |
| Total Debt to Equity | 322.9% |
Investment Thesis
Lockheed Martin Corporation (LMT) delivers reliability with $145.2B Market Cap, Quality rating 6.1, and 26.5% ROIC. Revenue of $75.1B shows 5.7% growth, FCF $6,908.0M at 9.2% margin, and intrinsic value $842.7. High Total Debt to Equity of 322.9% is balanced by 39.0% 1Y Return and 10.2% gross margin, making it a core holding in defense stock watchlist analyses focused on fighters and missiles.
Key Catalysts
- Strong 26.5% ROIC for capital efficiency.
- Reliable $6,908.0M FCF generation.
- Long-term government backlog.
- 39.0% 1Y Return stability.
Risk Factors
- Elevated 322.9% debt-to-equity.
- Modest 5.7% revenue growth.
- Budget cut vulnerabilities.
Stock #5: Northrop Grumman Corporation (NOC)
| Metric | Value |
|---|---|
| Market Cap | $97.8B |
| Quality Rating | 5.7 |
| Intrinsic Value | $841.8 |
| 1Y Return | 43.9% |
| Revenue | $42.0B |
| Free Cash Flow | $3,307.0M |
| Revenue Growth | 2.2% |
| FCF margin | 7.9% |
| Gross margin | 19.8% |
| ROIC | 8.4% |
| Total Debt to Equity | 118.4% |
Investment Thesis
Northrop Grumman Corporation (NOC) features $97.8B Market Cap, Quality rating 5.7, and intrinsic value $841.8. Revenue $42.0B with 2.2% growth, FCF $3,307.0M (7.9% margin), ROIC 8.4%, and 118.4% debt-to-equity. 43.9% 1Y Return underscores appeal in stealth tech and space systems for NOC investment opportunities.
Key Catalysts
- Solid 8.4% ROIC in high-tech defense.
- 43.9% 1Y Return outperformance.
- $841.8 intrinsic value upside.
- Niche in bombers and drones.
Risk Factors
- Slow 2.2% revenue growth.
- 118.4% debt-to-equity leverage.
- Contract concentration risks.
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Stock #6: General Dynamics Corporation (GD)
| Metric | Value |
|---|---|
| Market Cap | $94.5B |
| Quality Rating | 5.9 |
| Intrinsic Value | $489.6 |
| 1Y Return | 36.6% |
| Revenue | $52.6B |
| Free Cash Flow | $3,959.0M |
| Revenue Growth | 10.1% |
| FCF margin | 7.5% |
| Gross margin | 2.8% |
| ROIC | 10.4% |
| Total Debt to Equity | 31.3% |
Investment Thesis
General Dynamics Corporation (GD) balances scale with $94.5B Market Cap, Quality rating 5.9, 10.1% revenue growth to $52.6B, and FCF $3,959.0M (7.5% margin). ROIC 10.4%, low 31.3% debt-to-equity, and intrinsic value $489.6 support 36.6% 1Y Return in submarines and IT services.
Key Catalysts
- Healthy 10.4% ROIC.
- 10.1% revenue growth trajectory.
- Low 31.3% debt-to-equity.
- Diversified land/sea defense.
Risk Factors
- Thin 2.8% gross margin.
- Cyclical government orders.
- Competition in IT segment.
Stock #7: TransDigm Group Incorporated (TDG)
| Metric | Value |
|---|---|
| Market Cap | $82.3B |
| Quality Rating | 6.8 |
| Intrinsic Value | $1,071.9 |
| 1Y Return | 4.6% |
| Revenue | $8,831.0M |
| Free Cash Flow | $1,816.0M |
| Revenue Growth | 11.2% |
| FCF margin | 20.6% |
| Gross margin | 59.3% |
| ROIC | 19.1% |
| Total Debt to Equity | (310.3%) |
Investment Thesis
TransDigm Group Incorporated (TDG) excels with Quality rating 6.8, $82.3B Market Cap, 11.2% revenue growth to $8,831.0M, and 20.6% FCF margin on $1,816.0M FCF. ROIC 19.1%, 59.3% gross margin, and negative -310.3% debt-to-equity (net cash position) highlight strength, despite modest 4.6% 1Y Return and $1,071.9 intrinsic value.
Key Catalysts
- High 19.1% ROIC and 59.3% gross margin.
- 20.6% FCF margin cash machine.
- 11.2% revenue growth in aerospace parts.
- Net cash balance sheet.
Risk Factors
- Lagged 4.6% 1Y Return.
- Acquisition-driven growth risks.
- Airline sector cyclicality.
Stock #8: L3Harris Technologies, Inc. (LHX)
| Metric | Value |
|---|---|
| Market Cap | $64.1B |
| Quality Rating | 5.8 |
| Intrinsic Value | $343.5 |
| 1Y Return | 62.6% |
| Revenue | $21.9B |
| Free Cash Flow | $2,682.0M |
| Revenue Growth | 2.5% |
| FCF margin | 12.3% |
| Gross margin | 24.1% |
| ROIC | 6.1% |
| Total Debt to Equity | 0.0% |
Investment Thesis
L3Harris Technologies, Inc. (LHX) shows $64.1B Market Cap, Quality rating 5.8, $343.5 intrinsic value, and top 62.6% 1Y Return. Revenue $21.9B (2.5% growth), FCF $2,682.0M (12.3% margin), ROIC 6.1%, and 0.0% debt-to-equity emphasize clean finances in communications and electronics.
Key Catalysts
- Stellar 62.6% 1Y Return.
- Zero debt-to-equity strength.
- 12.3% FCF margin.
- Synergies in defense electronics.
Risk Factors
- Tepid 2.5% revenue growth.
- Integration post-merger risks.
- Moderate 6.1% ROIC.
Stock #9: HEICO Corporation (HEI)
| Metric | Value |
|---|---|
| Market Cap | $45.8B |
| Quality Rating | 7.1 |
| Intrinsic Value | $105.4 |
| 1Y Return | 39.0% |
| Revenue | $4,485.0M |
| Free Cash Flow | $861.4M |
| Revenue Growth | 16.3% |
| FCF margin | 19.2% |
| Gross margin | 41.1% |
| ROIC | 11.7% |
| Total Debt to Equity | 44.7% |
Investment Thesis
HEICO Corporation (HEI) boasts Quality rating 7.1, $45.8B Market Cap, 16.3% revenue growth to $4,485.0M, and 19.2% FCF margin on $861.4M FCF. ROIC 11.7%, 41.1% gross margin, 44.7% debt-to-equity, and $105.4 intrinsic value align with 39.0% 1Y Return in aftermarket parts.
Key Catalysts
- Strong 16.3% revenue growth.
- 11.7% ROIC efficiency.
- 19.2% FCF margin.
- Niche dominance in components.
Risk Factors
- Possible overvaluation vs. $105.4 intrinsic.
- Aviation cycle dependence.
- Smaller scale vs. primes.
Stock #10: Axon Enterprise, Inc. (AXON)
| Metric | Value |
|---|---|
| Market Cap | $38.9B |
| Quality Rating | 5.8 |
| Intrinsic Value | $58.4 |
| 1Y Return | -26.0% |
| Revenue | $2,558.0M |
| Free Cash Flow | $145.0M |
| Revenue Growth | 31.8% |
| FCF margin | 5.7% |
| Gross margin | 60.3% |
| ROIC | 2.9% |
| Total Debt to Equity | 69.4% |
Investment Thesis
Axon Enterprise, Inc. (AXON) grows fast with 31.8% revenue growth to $2,558.0M, $38.9B Market Cap, and Quality rating 5.8. FCF $145.0M (5.7% margin), 60.3% gross margin, ROIC 2.9%, and 69.4% debt-to-equity contrast -26.0% 1Y Return, with $58.4 intrinsic value signaling rebound potential in tasers and body cams.
Key Catalysts
- High 31.8% revenue growth.
- 60.3% gross margin scalability.
- Expanding law enforcement tech.
- Recurring software revenue.
Risk Factors
- Negative -26.0% 1Y Return.
- Low 2.9% ROIC.
- 69.4% debt-to-equity pressure.
Portfolio Diversification Insights
These 10 defense tech stocks cluster in aerospace (RTX, BA, TDG), prime contractors (LMT, NOC, GD), electronics (LHX, HEI), and innovators (PLTR, AXON), providing sector allocation across sub-themes for reduced volatility. PLTR and AXON add tech growth, while LMT and NOC offer stability; combine high-ROIC leaders like PLTR 76.6% with steady FCF generators like RTX for balanced exposure. Market caps range from $38.9B (AXON) to $349.5B (PLTR), enabling scalable positions. Cross-references show debt contrasts—LHX 0% vs. BA 991.4%—enhancing risk spread in a defense stock watchlist.
Market Timing & Entry Strategies
Consider entry during defense budget cycles or post-earnings dips, monitoring revenue growth leaders like BA 34.5% or AXON 31.8% for momentum. Dollar-cost average into high intrinsic value names like LMT $842.7 amid geopolitical escalations. Track 1Y Returns for trends—PLTR 80.5% signals strength—while avoiding peaks for overvalued picks. Use ValueSense metrics for phased positioning, focusing on ROIC >10% for long-term holds.
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FAQ Section
How were these stocks selected?
Selected via ValueSense methodology emphasizing Quality rating, intrinsic value, ROIC, revenue growth, and FCF margins from defense tech data, prioritizing undervalued opportunities with strong financials.
What's the best stock from this list?
PLTR leads with top 8.1 Quality rating, 76.6% ROIC, and 80.5% 1Y Return, though analyze per risk tolerance—LMT offers stability with 26.5% ROIC.
Should I buy all these stocks or diversify?
Diversify across sub-sectors like primes (LMT, NOC) and tech (PLTR, AXON) to balance growth and defense stability, using market cap and debt metrics for allocation.
What are the biggest risks with these picks?
High debt (BA 991.4%, LMT 322.9%), slow growth (NOC 2.2%), and government budget dependence; negative returns like AXON -26.0% add volatility.
When is the best time to invest in these stocks?
During geopolitical tensions boosting budgets or when prices approach intrinsic values (e.g., LMT $842.7), monitoring FCF and ROIC for entry signals.