Defense and aerospace stocks are back in focus after AeroVironment surprised the market, with its shares jumping 21% on revenue that doubled year over year and a funded backlog reaching $1.2b. That move, combined with a record US$75b drone request within a proposed US$1.5t U.S. defense budget for 2027, has drawn attention to companies linked to drones, autonomous systems, and broader military technology. If you are looking for ideas on which stocks could be potential beneficiaries or ones to avoid, this article breaks down 3 positively exposed stocks from our Defense and Aerospace Stocks screener.

Ducommun (DCO)

Overview: Ducommun is a US-based aerospace and defense manufacturer that builds critical electronic systems and complex structural components for commercial and military aircraft, missiles, drones and space programs, as well as serving industrial and medical markets.

Operations: Ducommun generates about US$471.2m of revenue from its Electronic Systems segment and US$370.2m from Structural Systems.

Market Cap: US$2.68b

Investors looking at Ducommun are getting exposure to the picks and shovels of rising defense tech spending, from missile and radar programs to UAV components, supported by a record defense backlog that has been discussed on recent calls and renewed interest after the latest drone budget headlines. At the same time, the company is still loss-making, carries higher-risk borrowings and has seen significant insider selling, so the path to the high earnings growth analysts expect is not risk free. With Q1 2026 results showing higher revenue and earnings alongside an active acquisition pipeline and solid governance, the real question is whether Ducommun can convert today’s defense tailwinds and restructuring efforts into durable, high quality cash flows.

Ducommun’s defense tailwinds and backlog story looks powerful, yet the stock’s higher-risk borrowings and insider selling raise fair questions, so it is worth seeing how the 2 key rewards and 1 important warning sign

RADA Electronic Industries (RADA)

Overview: RADA Electronic Industries is a defense technology company based in Israel that supplies radars, avionics and mission recording systems for fighter jets, unmanned aircraft and ground forces, with products used in air combat, border protection, critical infrastructure security and counter drone missions worldwide.

Market Cap: US$490.9m

RADA Electronic Industries sits in the slipstream of the drone and autonomous systems theme that has been associated with AeroVironment and other defense stocks, because its tactical radars and avionics are core components in many of those platforms. Analysts currently project very strong earnings growth potential and solid revenue expansion. However, the company comes with clear trade offs, including a sharp earnings decline over the past year, a high P/E multiple and margins that are currently soft, despite a history of turning profitable over the last five years. With all liabilities funded through higher risk external borrowings and some governance questions around executive pay, the real consideration for investors is whether RADA’s defense demand profile and NATO focused export strategy adequately offset the valuation and balance sheet risk.

RADA Electronic Industries sits at the crossroads of aggressive defense demand, a high P/E and recent earnings pressure. The full picture sits inside the 2 key rewards and 1 important warning sign

EHang Holdings (EH)

Overview: EHang Holdings is a Guangzhou based urban air mobility company that designs, builds and operates autonomous aerial vehicles and supporting infrastructure for passenger transport, logistics, smart city services and aerial light shows across China and several overseas regions.

Operations: EHang Holdings currently generates around CN¥417.5m of revenue from its Aerospace & Defense activities.

Market Cap: US$479.7m

EHang Holdings sits at the intersection of fast growing eVTOL demand and rising interest in drone and autonomous systems, with management recently reporting record revenues, high gross margins around 60% and progress on government backed low altitude economy projects such as Hong Kong’s sandbox initiative. At the same time, the company remains loss making with widening recent losses, relies on higher risk external funding and faces certification delays that some analysts now think could push breakeven further out. This helps explain why the stock trades at a steep discount to some value estimates despite a US$30m buyback plan. For investors, the real question is whether EHang’s early lead and government partnerships outweigh these funding and execution risks as the sector develops.

EHang’s record revenues, high gross margins and government backed projects hint at a bigger story taking shape, and the analyst forecasts for EHang Holdings could show whether current expectations fully capture the next twist

The three defense and aerospace stocks covered here are only a starting point. The full Defense and Aerospace Stocks screener surfaces 43 more companies that pair established market positions with equally compelling narratives around drones, autonomous systems and military technology. Use Simply Wall St to identify the specific catalysts and risk profiles that matter to you, then analyze and filter those stories into a shortlist of the highest conviction ideas for your own watchlist.

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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.