Higher energy costs linked to geopolitical risk are feeding into inflation expectations worldwide. That keeps attention on governments and defense budgets. For investors, that puts the Aerospace and Defense screener on the radar as policymakers reassess security priorities. This article highlights three stocks from the screener that could help you get focused exposure to this theme, with plain English analysis on what each business does and the key risks to watch.

The three companies below are just a starting sample, and the full screen surfaced 73 more Aerospace and Defense stocks with equally compelling narratives that are not covered here. To identify and analyze the highest conviction ideas for your portfolio, head straight into the Aerospace And Defense screener.

Redwire (RDW)

Overview: Redwire supplies mission critical space hardware and infrastructure such as star trackers, sun sensors, cameras, RF payloads, antennas, spacecraft platforms and in space manufacturing facilities that sit directly in the middle of government and commercial space missions. Around this core, Redwire also offers microgravity payloads, digital engineering software, biotech facilities in orbit and autonomous and ISR systems for defense customers.

Operations: Redwire generates about US$208.9 million from its Space segment and US$217.4 million from Defense Tech, with roughly US$245.5 million of revenue from the U.S., US$149.4 million from Europe and US$31.3 million from other markets.

Market Cap: US$3.0b

Investors looking at space as part of the Aerospace and Defense theme may find Redwire interesting because it is already supplying the nuts and bolts that keep satellites and spacecraft pointing in the right direction while also building in space manufacturing, microgravity pharma and uncrewed aircraft systems. The latest contract wins with Space Systems Command and NATO customers, along with record backlog and a growing microgravity center of excellence, indicate how embedded Redwire is in current and planned programs. There are also clear risks. The company reports losses, depends heavily on government budgets and is integrating sizeable acquisitions. If management can turn that backlog into steadier cash flow, the company’s risk profile could look very different over time.

Redwire’s expanding backlog and mission critical hardware story can look very different once you factor in cash generation and contract quality. Get the full picture in the 2 key rewards and 3 important warning signs (2 are major!)

Build your own Aerospace and Defense stock shortlist

Redwire and the other two stocks in this article are all examples of what you can surface with a focused screen on Aerospace and Defense. Use our flexible Screener to combine filters on valuation, future growth, balance sheet strength and risks, or start from one of our curated Investing Ideas.

Rocket Lab (RKLB)

Overview: Rocket Lab is a space company that designs and launches small and medium class rockets, such as Electron and the developing Neutron vehicle, to put satellites into orbit for commercial, government and defense customers. It also builds satellites, mission hardware and on orbit services that support military and national security missions, giving it a direct role in the Aerospace and Defense theme beyond launch alone.

Operations: Rocket Lab generates about US$544.1 million from its Space Systems segment and around US$225.1 million from Launch Services.

Market Cap: US$43.4b

Rocket Lab gives you pure play exposure to the space infrastructure that underpins modern defense, from hypersonic test launches under its HASTE program to Space Force contracts for threat tracking satellites and secure optical communications. The company is still loss making and has a funding structure built entirely on external borrowing, which can magnify pressure if programs slip or refinancing costs rise. A multibillion dollar backlog, growing defense awards and a push to vertically integrate through the planned Iridium deal all reflect a business that is trying to move from lumpy launch revenue to recurring services. If Neutron reaches regular operations and management reins in dilution and funding risk, the long term pay off for Rocket Lab could diverge significantly from what current losses suggest.

Rocket Lab’s push to turn a multibillion dollar backlog into recurring defense and space services is only half the story. See how the balance of opportunity and funding risk lines up in the 2 key rewards and 3 important warning signs

Kratos Defense & Security Solutions (KTOS)

Overview: Kratos Defense & Security Solutions focuses on unmanned aerial systems, missile and hypersonic propulsion, and satellite and space ground systems that are sold mainly to defense and national security agencies. Alongside these aerospace linked platforms, Kratos also provides software, electronics and training systems for a broader set of government and commercial customers.

Operations: Kratos generates about US$1.21b from Kratos Government Solutions and US$317.4 million from Unmanned Systems, with roughly US$1.20b of revenue reported from the United States.

Market Cap: US$10.7b

Kratos Defense & Security Solutions is drawing attention because its jet powered drones, hypersonic propulsion work and satellite ground systems are directly tied to the hardware and electronics that defense customers are prioritizing, yet the company is still operating on relatively slim 2% profit margins and low returns on equity. A US$2.08b backlog, growing hypersonic and drone programs and recent policy tailwinds such as higher tariffs on foreign military drones point to a business that may be preparing for a scale up in production. At the same time, heavy investment, reliance on a few key suppliers, government budget exposure and insider selling in recent months indicate that the path from contract wins to durable cash generation involves meaningful risks.

Kratos Defense & Security Solutions looks like a company where hypersonic projects and jet powered drones could be masking a deeper turning point in the business. See how the 2 key rewards and 1 important warning sign might change your view on what comes next.

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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.