Leonardo DRS, Inc.

Leonardo DRS Inc receives a 3-star quantitative star rating, reflecting our opinion that this share class is a balanced choice, but prudent investors should consider looking elsewhere. The stock currently trades at a 4% discount to our quantitative fair value estimate of $38.12 per share; however, some caution is warranted due to this estimate's medium uncertainty rating.

The company's solid growth increases our valuation estimate. Consistent revenue and earnings growth indicates a company's potential for increased market share and profitability. For example, the firm's EBIT 3-year growth of 38.4% falls in the top 20% globally. Earnings before interest and taxes growth over the past three years has proved robust, bolstering the long-term value of the business. We believe this is a sign that shares could be cheap.

Conversely, the company's valuation metrics are potentially concerning. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. The firm's enterprise value to market value ratio of 1.0, for example, sits in the bottom 45% compared with global peers. The market value of equity makes up a large fraction of enterprise value, indicating that shares have sharply risen, or that the company has a "lazy" balance sheet that is underleveraged. Despite our favorable price/fair value ratio, this characteristic is a negative attribute.

The narrow moat rating for this company indicates investors can expect it to generate 10 years or more of excess returns on capital due to its respectable competitive advantages. In addition, the company's moderate financial health score is decent and doesn't seriously concern us with regard to financial distress.