Leonardo DRS (DRS) Profit Margin Rises to 7.4%, Challenging Industry Valuation Narratives

Leonardo DRS (DRS) posted a year-over-year net profit margin increase to 7.4%, up from 6.2%, with earnings growing 33.8%, well above its 5-year average annual growth rate of 10.4%. EPS growth is forecast at 15.8% annually, just ahead of the overall US market's 15.7% forecast, and the company expects 5.6% revenue growth per year moving forward. With profitability accelerating and margins continuing to expand, investors are likely taking notice of DRS’s ability to outpace its long-term trends and much of the sector on core metrics.

See our full analysis for Leonardo DRS.

The next section puts these standout numbers side by side with Simply Wall St's community narratives to see how the recent earnings shake up the prevailing stories around DRS.

See what the community is saying about Leonardo DRSNasdaqGS:DRS Earnings & Revenue History as at Oct 2025

Profit Margins Track Higher Guidance

Profit margins are forecast to rise from 7.3% today to 8.5% within three years, with analysts expecting earnings to reach $351.1 million by about September 2028, a sharp climb from $250 million currently. Analysts' consensus view credits this margin expansion to continued R&D investment and major government contracts that target advanced defense technologies.

They highlight that ramped-up innovation spending, especially in proprietary areas like space sensing and network computing, is expected to drive program wins and strengthen competitive positioning. However, consensus does note that concentrated reliance on large U.S. contracts could magnify budget risk. Sustaining these margins may depend on broadening DRS's global customer base.

See if the consensus narrative truly captures both upside and caution for DRS’s next phase. 📊 Read the full Leonardo DRS Consensus Narrative.

Valuation Discount Narrows Against Industry

DRS trades at a price-to-earnings ratio of 36.2x, which is below the Aerospace & Defense industry average of 41x but slightly higher than close peers at 35.9x and well above its DCF fair value of $31.60, given the current share price of $36.05. Analysts' consensus view sees this as reflecting DRS’s higher earnings quality and strategies to boost margins, but flags that future price appreciation may hinge on whether revenue growth can shift closer to the industry’s 10.3% pace.

Consensus points out that since DRS is still trading roughly 17.7% below the consensus analyst price target of $48.00, there could be meaningful upside. Yet the premium to DCF fair value suggests careful scrutiny is warranted. They also note that moving from a discounted valuation versus industry to a true premium may require clearer progress on international diversification and proprietary technology wins.

Story Continues

Revenue Growth Trails Broader Market

While analysts expect DRS's revenue to grow about 5.6% annually, this trails the broader US market’s 10.3% rate and the 6.6% that analysts assume for DRS over the next three years. Consensus narrative frames this more modest trajectory as a function of DRS's strong focus on high-value defense programs, meaning revenue gains may be steadier but less explosive than firms chasing broader markets.

They emphasize that alignment with defense modernization trends and NATO spending remains a key tailwind, likely supporting program expansions and a growing backlog. Still, consensus concedes that raw material constraints and federal budget swings could add volatility to these projections, especially given DRS’s heavy exposure to U.S. government contracts.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Leonardo DRS on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

Notice something the consensus missed? You can share your angle and shape a unique story in under three minutes. Do it your way

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Leonardo DRS.

See What Else Is Out There

Despite improving profitability, DRS's revenue growth is projected to lag behind both peers and the broader market. This raises questions about its long-term momentum.

If steadier revenue and earnings are your priority, use our stable growth stocks screener (2108 results) to pinpoint companies delivering consistent growth regardless of sector swings or market cycles.

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.

Companies discussed in this article include DRS.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

View Comments