Defense stocks aren't best judged on trailing P/E alone. Key factors include:Order backlog & book-to-bill ratio — Visibility into multi-year revenue (ST Eng has a healthy one).
Growth profile — Especially in high-margin areas like electronics, cyber, and smart defence systems.
EV/EBIT or forward P/E — These better capture the business quality than trailing earnings, which can be lumpy.
Contract stability — Government-backed revenue often justifies a premium.
Many quality defence names trade at elevated multiples today due to geopolitical spending, but always cross-check with EV/EBITDA, free cash flow conversion, and peer comps (e.g., some pure-play defence peers sit lower, while growth-oriented ones command 30x+ forward). At current levels, ST Eng prices in a lot of optimism — fine if growth delivers, but leaves limited margin of safety.
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