On paper, 2026 should have been the year of the defense contractor. The Pentagon asked for $1.5 trillion for fiscal 2027, Lockheed Martin ended June with a record $230 billion backlog, and Northrop Grumman reached a record $105 billion. We ranked 24 defense stocks against their own five-year valuation history, as of October 5, 2026. Most of the big contractors trade in the bottom quarter of their own range. The newer names in space, software and autonomy trade near the top.
If you only read one thing
The short version: Lockheed Martin, Northrop Grumman, General Dynamics and Textron sit between the 1st and 22nd percentile of their own five-year EV/Sales range, despite record order books. RTX is the exception among the primes. Rocket Lab, Planet Labs, Palantir, Kratos and Mercury Systems sit between the 71st and 90th. The split follows revenue growth more than the budget.
How to read the numbers
Each figure answers one question: compared with what this stock has cost over its own last five years, what does it cost today? We compute trailing EV/Sales weekly from SEC filings and market prices and rank today's value in that five-year distribution. The 10th percentile means the stock cost more than today about 90% of the time.
We use EV/Sales for this group because several drone, space and electronics makers report little or no profit, and contractor margins move slowly, so sales are a steady base. The tradeoffs are in our guides on when to use P/E, P/S, EV/Sales, or EV/EBITDA and what a valuation percentile is and how we compute it.
The takeaway: Every number below compares a stock with its own past. A low percentile means cheap by that company's own standard. It does not by itself mean undervalued.
The full table
| Ticker | Layer | EV/Sales | EV/Sales 5y %ile | Revenue growth (TTM) |
|---|---|---|---|---|
| MRCY | Missiles and parts | 4.9x | 89.5 | 8% |
| RKLB | Space | 57.5x | 82.5* | 53% |
| PL | Space | 15.5x | 79.0* | 44% |
| RTX | Primes | 2.9x | 78.0 | 12% |
| PLTR | Software and AI | 77.2x | 77.4 | 79% |
| CW | Shipbuilding | 5.7x | 74.3 | 11% |
| KTOS | Drones | 4.4x | 70.7 | 26% |
| DRS | Missiles and parts | 2.6x | 60.4* | 10% |
| BWXT | Shipbuilding | 3.9x | 57.1 | 23% |
| GD | Primes | 1.8x | 22.2 | 9% |
| AXON | Software and AI | 10.9x | 21.8 | 35% |
| HII | Shipbuilding | 1.0x | 20.1 | 14% |
| LMT | Primes | 1.7x | 11.5 | 7% |
| NOC | Primes | 1.9x | 4.6 | 6% |
| HEI | Missiles and parts | 8.7x | 3.8 | 21% |
| TDG | Missiles and parts | 9.3x | 3.1 | 17% |
| AVAV | Drones | 3.6x | 1.9 | 84% (acquisition) |
| TXT | Primes | 0.8x | 1.1 | 9% |
| KRMN | Missiles and parts | 7.6x | 1.1* | 50% |
Where these stand now
Current readings update separately from the article’s dated analysis.
Above its usual range
LMT's P/E of 22.9x is higher than 76% of its weekly readings over the last five years.
Above its usual range
RKLB's P/S of 48.4x is higher than 74% of its weekly readings since August 2022.
Above its usual range
MRCY's P/S of 4.9x is higher than 86% of its weekly readings over the last five years.
The live version of this table, grouped into layers with an equal-weight basket against the SPDR S&P Aerospace & Defense ETF (XAR), is on the Defense Tech theme page.
The primes: big order books, low ranks
Four of the five primes sit in the bottom quarter of their own range. Lockheed trades at 1.73 times sales against a five-year median of 1.88. Northrop trades at 1.89 against 2.18. Textron sits at its five-year low.
The order books are not the problem. Lockheed signed seven-year deals to triple PAC-3 interceptor output and quadruple THAAD. Raytheon signed five framework agreements to raise missile production two to four times. What weighs on the group is how much of that turns into shareholder returns: a January executive order limits buybacks and dividends for contractors the Pentagon judges to be underperforming, and fixed-price programs keep producing losses, such as more than $2 billion on early B-21 bombers at Northrop.
RTX is the exception at the 78th percentile. Most of its revenue comes from Pratt & Whitney engines and Collins aircraft systems, so its rank tracks commercial aviation as much as defense.
The takeaway: The big contractors have more signed work than ever, yet four of five trade near five-year-low sales multiples. The market is weighing margins, payout limits and funding risk, not demand.
The newer names: priced for growth
Rocket Lab, Planet Labs and Palantir grew revenue 44% to 79% over the trailing year and trade between the 77th and 83rd percentile. Kratos, growing 26% with a raised 2026 outlook, sits at the 71st. On this measure, growth explains most of the ranking.
Two names break the pattern. Mercury Systems grew 8% and sits at the 90th percentile, the highest in the group, so its rank rests on something other than sales growth. AeroVironment grew 84%, but most of that came from buying BlueHalo, which nearly doubled its size. Its multiple sits near a five-year low because the price did not keep up with the added revenue.
The takeaway: Faster growers carry higher ranks, as you'd expect. Mercury is high-ranked without the growth, and AeroVironment's low rank partly reflects an acquisition, not a collapse.
Government services: the same names as the cyber theme
Leidos, Booz Allen and Parsons sit near the bottom of their own ranges, and CACI near the top. We covered that split in government cyber stocks near five-year-low multiples. From the defense side, the point is the same: the budget's growth is in hardware, munitions and space, while consulting and civilian IT work face cuts.
What to check before reading too much into it
- Funding. About $350 billion of the request sits in a reconciliation bill that has not passed, including most of the Golden Dome and munitions money.
- Revenue mix. RTX, TransDigm, HEICO and Textron earn much of their revenue from commercial aviation.
- Short histories. Rocket Lab, Planet, Leonardo DRS and Karman have less than five years of data.
- Acquisitions. AeroVironment's and Kratos's growth includes bought revenue.
The takeaway: A record backlog and a five-year-low multiple can both be true. The questions are how much of the backlog becomes profit, and whether Congress funds the rest.
Data: SEC EDGAR XBRL filings and market prices, computed by StockResearch as of October 5, 2026. Budget figures are requests, not final appropriations. Jake is the founder of StockResearch.app, where he writes data-first research on valuation dislocations. Nothing here is investment advice or a recommendation to buy or sell any security. Do your own research.