Defense Companies Valuation - Europe vs US

Growing political tensions forced Europe to take matters into its own hands, and markets noticed - European defense stocks trade significantly higher than American counterparts, and much higher than the famous US tech Magnificent 7.

The European Defense 7 (Rheinmetall, Thales, BAE Systems, Rolls-Royce, Leonardo, Safran, Dassault Aviation) show substantial valuation multiple growth and much better performance compared to the US Defense 10 (GE Aerospace, Boeing, RTX, Lockheed Martin, TransDigm, General Dynamics, Howmet Aerospace, Axon, L3Harris, Northrop Grumman).

Since April 2020, European defense stocks have massively outperformed their American peers. A basket of seven European defense companies — Rheinmetall, Thales, Leonardo, Dassault Aviation, BAE, Rolls-Royce, and Safran — has delivered a 330% return in market cap terms, nearly three times the 113% gain posted by the ten largest US defense names including RTX, Boeing, Lockheed Martin, and Northrop Grumman.

European defense EV/NTM revenue multiples have expanded by 365% since April 2020, compared to 192% for the US group. This widening valuation premium reflects investors pricing in a structural increase in European military spending driven by ongoing geopolitical tensions.

European defense stocks have also outperformed the famous US Magnificent 7 tech giants. The 330% return from the European defense basket dwarfs the Mag 7's 77% gain over the same period, making European defense one of the best-performing public equity themes globally over the past five years.

The valuation re-rating story holds up against Big Tech too. European defense revenue multiples have expanded 365% versus 225% for the Magnificent 7, showing that even compared to the most hyped segment of global equities, the market's appetite for European defense exposure has been significantly stronger in recent months.

The analysis is built on Multiples' data, powered by FactSet consensus analyst estimates and Morningstar historical data. Financial data is calendarized to December year-ends and harmonized to USD. The European basket includes Rheinmetall, Thales, Leonardo, Dassault Aviation, BAE, Rolls-Royce, and Safran; the US basket includes RTX, Boeing, Lockheed Martin, TransDigm, Northrop Grumman, General Dynamics, Howmet Aerospace, Axon Enterprise, and L3Harris.