With inflation, interest rates and geopolitical risks all in focus, many investors are looking for sectors that are closely tied to government spending and long-term contracts. The Aerospace And Defense screener highlights companies that manufacture or provide services to these industries, offering exposure to themes such as security, air travel and critical infrastructure. This article cuts through the noise and introduces 3 of the best stocks from the Aerospace And Defense screener, chosen for their clear business focus and relevance to what markets are watching right now so you can decide whether they deserve a place on your radar.

Saab (OM:SAAB B)

Overview: Saab is a Stockholm based defense and security company that supplies fighter aircraft, submarines, missile systems, radar and electronic warfare, and related consulting and IT services to governments and civil customers worldwide.

Operations: Saab generates most of its revenue from Surveillance (SEK 28.97b), Dynamics (SEK 21.16b) and Aeronautics (SEK 19.81b), with Sweden (SEK 34.08b) and the rest of Europe (SEK 22.31b) as its largest end markets.

Market Cap: SEK302.66b

Saab provides direct exposure to long-term defense spending through a broad mix of radar, submarines, missiles and advanced aircraft, supported by a sizeable contract backlog and a stream of recent deals from Poland, Canada, Denmark, France and others. Earnings growth has outpaced the wider Swedish market, and analysts report expectations for continued revenue and profit expansion, but the current P/E is well above peers and insider selling in recent months calls for extra scrutiny. Heavy reliance on government budgets, export controls and ongoing investment in AI and autonomous systems also introduces execution risk. A key consideration for investors is whether Saab’s contract visibility and technology focus adequately compensate for the richer valuation and these trade offs.

Saab’s accelerating order book and premium P/E suggest investors may be missing a key piece of the story. The 2 key rewards and 1 important warning sign could show whether the current optimism is masking something more subtle.

AeroVironment (AVAV)

Overview: AeroVironment is a defense technology company that builds uncrewed aircraft, robotic systems and advanced space, cyber and directed energy solutions that help militaries and government agencies gather intelligence, defeat hostile drones and maintain secure communications on the ground, at sea and in orbit.

Operations: AeroVironment generates most of its revenue from Autonomous Systems at about US$1.36b, with the Space, Cyber and Directed Energy segment contributing roughly US$618.77m, and a customer base weighted toward the United States over international markets.

Market Cap: US$9.62b

AeroVironment provides direct exposure to several rapidly evolving areas of modern defense, including small drones, loitering munitions, counter UAS systems and space based communications. Its business is supported by a growing backlog and new contracts such as the US$500m Titan RF C UAS award running through 2029. Analysts currently expect earnings growth and continued progress toward profitability, supported by higher value AI enabled and software rich platforms. At the same time, the current valuation implies high expectations, and the BlueHalo acquisition has created additional pressure on margins. Heavy reliance on US defense budgets, integration execution risk and rapid shifts in underlying technologies all contribute to a more complex risk reward profile than headlines alone may indicate.

AeroVironment’s accelerating shift into AI enabled drones and space systems is only half the story, because the real tension sits between its rich valuation and what the analyst forecasts for AeroVironment are quietly signaling about the next chapter

Huntington Ingalls Industries (HII)

Overview: Huntington Ingalls Industries is the largest U.S. military shipbuilder, designing, constructing and servicing nuclear and non nuclear warships for the U.S. Navy and Coast Guard while also supplying advanced C5ISR, cyber, electronic warfare and autonomous systems through its Mission Technologies segment.

Operations: Huntington Ingalls Industries generates most of its revenue in the United States from Newport News at US$6.8b, Ingalls at US$3.2b and Mission Technologies at US$3.1b, partly offset by about US$150m of intersegment eliminations.

Market Cap: US$11.49b

Huntington Ingalls Industries may appeal to investors who want exposure to long term U.S. naval spending and the shift toward autonomous maritime systems in a single stock, with a US$56.9b backlog, new multi year maintenance contracts and active programs across destroyers, carriers and unmanned vessels. Analyst earnings growth forecasts, a dividend near 1.9% and a valuation that is described as relatively undemanding compared with many U.S. defense peers are drawing attention to HII at a time when its Mission Technologies segment is securing more autonomy and C5ISR work. On the other hand, the company has high debt, modest margins and dependence on a few large Navy contracts, so the key consideration for investors is whether that combination of shipyard scale and potential autonomy upside is adequately reflected in the current share price.

Huntington Ingalls Industries sits at the crossroads of a US$56.9b backlog, autonomy potential and a valuation many see as relatively undemanding, but the real twist shows up in the 5 key rewards and 2 important warning signs

The three stocks in this article are just a starting point, and the full Aerospace And Defense screener uncovers 296 more companies with equally compelling aerospace and defense narratives waiting to be compared side by side. Use Simply Wall St to identify, filter and analyze the specific catalysts and contract driven stories that matter to you so you can focus on the highest conviction ideas in this theme.

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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.