Alone Together

It’s hard to keep up with all the geopolitical chaos, but one clear takeaway has emerged: Europe must take charge of its own defense. Relying blindly on the U.S. is no longer viable even if President Trump backtracks from his hostility (indifference at best) towards the EU. Shifting away from U.S. dependency, technologically, won’t happen overnight, raising the critical question—who will step in?

It turns out that Europe does have a defense industry. It doesn't match up to the US by any means but Mr. Market thinks there is hope. European defense stocks have been on a steady climb since Russia invaded Ukraine, and we wondered whether there are there still any European defense stocks worth exploring? Naturally, we turned to The Buycaster. Here’s a list of the top 10 European defense companies by market capitalization, ranked by their Inevitability Scores. One name stands out above the rest. 

If you pull up Rheinmetall AG in The Buycaster, its strong score makes sense. Optimistic revenue growth projections play a role, but the real driver is Wall Street’s overwhelming confidence in the company. The new German government, led by its incoming Chancellor, has fully committed to strengthening national defense, and analysts were quick to adjust their models accordingly.  

We have not dug into the company’s story to qualify that optimism, which prevents us from making any bold claims. However, if you like the Rheinmetall story, or if you believe Wall Street’s prognosis, the stock still looks undervalued.

This shift also led us to refine our approach within The Buycaster. Traditionally, we calculated "The Downcast"—our pessimistic revenue projection—by largely ignoring Wall Street forecasts in favor of a company’s historical revenue growth, though we displayed both for reference. However, with the world changing so rapidly, we now believe analysts deserve more credit—for their expediency if nothing else. As of today, our Downcast factors in both the company’s historical revenue growth trends AND Street estimates for a more balanced projection. This change improves the investability scores of some companies and hurts others. No doubt, it helps Rheinmetall.