Defense stocks have rebounded in price, but are now more overpriced than ever before, making them a risky investment. Historical data shows that over the past 20 years, defense stocks have cost about 40% more than their annual sales, indicating inflated prices. Comparing today’s enterprise value-to-sales ratios (EV/S) and price-to-sales ratios (P/S) for major U.S. defense companies, the average EV/S ratio is 2.77, nearly double the historical fair value. This indicates a significant risk of steep declines in the future for both existing and new buyers. Investors may continue to bet on military stocks due to global tensions, but underperformance compared to the S&P 500 is likely in the next decade.

Source: https://www.fool.com/investing/2024/10/19/do-defense-stocks-cost-too-much/

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Source: https://www.fool.com/investing/2024/10/19/do-defense-stocks-cost-too-much/

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