AeroVironment (AVAV) has attracted fresh attention after its MacCready Works team secured a NASA contract to co-design and co-manufacture three Mars helicopters for the SkyFall mission, which is planned for launch in late 2028.

Despite the NASA SkyFall contract and recent defense orders, AeroVironment’s share price has come under pressure, with a year to date share price return down 40.6% and a 1 year total shareholder return down 38.8%, even though the 3 year total shareholder return is positive at 56.9%.

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AeroVironment now looks like a strong business with a weak share price chart. After a near 40% decline over the past year, is the current valuation actually giving you a sensible entry point into that growth story?

Most Popular Narrative: 32.5% Undervalued

Against AeroVironment’s last close of $152.28, the most followed narrative pegs fair value at $225.77, which frames the recent share price slide very differently.

AeroVironment's growing list of large, multi-year government contracts (funded and unfunded backlog), as well as its positioning as a sole-source or leading provider in next-generation missile defense, Counter-UAS, and space comms, offers long-term revenue visibility and reduces downside risk associated with individual program delays, further enhancing future earnings stability.

Read the complete narrative. Read the complete narrative.

Want to understand why this narrative still sees upside after lawsuits, impairments, and a sharp reset in expectations? The fair value hinges on stronger revenue compounding, a swing from losses to profits, and a premium earnings multiple that assumes AeroVironment grows into a much larger defense technology platform. The key assumptions sit in the gap between today’s losses and tomorrow’s margin profile. That is where the story really gets interesting.

Result: Fair Value of $225.77 (UNDERVALUED)

However, AeroVironment’s reliance on U.S. defense contracts and the SCAR related lawsuits, impairments, and control issues could still undermine that upbeat narrative if outcomes disappoint.

Another View: What AeroVironment’s Sales Multiple Is Telling You

The first narrative for AeroVironment leans on future earnings and a fair value of $225.77. On today’s numbers, the P/S ratio is 3.9x, which is higher than a fair ratio of 2.5x, yet lower than both peers at 4.9x and the wider US Aerospace & Defense group at 4.7x. That mix of signals points to real valuation risk if growth disappoints, but also some relative support versus the sector. Which part of that trade off matters more to you?

Next Steps

With AeroVironment presenting both promising growth narratives and clear concerns, now is the time to review the data yourself and decide how the balance of risks and rewards stacks up for your portfolio with 2 key rewards and 1 important warning sign

Looking for more investment ideas beyond AeroVironment?

If AeroVironment has sharpened your interest in defense and robotics, now is a great moment to broaden your watchlist with a few focused stock ideas.

• Target potential mispricings by checking companies that currently look attractively valued on fundamentals with our 46 high quality undervalued stocks.
• Strengthen your income stream by reviewing businesses that combine higher yields with resilient payouts through the 12 dividend fortresses.
• Dial down risk by focusing on companies that show sturdier financials and lower volatility using the 76 resilient stocks with low risk scores.

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.