Pentagon's New Warship Contract Reignites Interest in These Best Defense Company Stocks

The Opportunity: Defense Sector Valuation Reset

While the broader defense stock market has become increasingly expensive, a recent Navy contract announcement has spotlighted two undervalued players that still approach reasonable valuations. With military spending accelerating globally and geopolitical tensions rising, identifying affordable entry points in the defense sector requires careful analysis — and two companies currently fit the bill.

Huntington Ingalls: The Catalyst Play

The game-changer arrived late last week when the U.S. Navy announced it selected Huntington Ingalls to design and build a new class of small surface combatant warships. This decision effectively replaces an entire program of Constellation-class frigates originally planned for construction by another builder.

What This Means: The original Constellation program aimed to deliver at least 20 frigates, with potential for triple that number. Now, only two Constellations will be built, leaving substantial capacity for Huntington’s alternative design. This represents significant upside potential for the shipbuilder.

The Valuation Story: Huntington Ingalls trades at approximately 1.1x annual sales with a market capitalization just over $13.2 billion against $12 billion in annual revenue. That’s compelling in an industry where peers command much steeper multiples. The stock jumped more than 4% following the Navy announcement, yet remains within reasonable valuation bounds.

As a specialized nuclear-powered aircraft carrier and submarine builder, Huntington maintains strategic importance to U.S. naval expansion efforts in the Asia-Pacific region. The company’s ability to deliver these complex platforms ensures steady revenue flow regardless of budget cycles.

Textron: The Diversified Alternative

For investors seeking exposure to best defense company stocks through different platforms, Textron offers a compelling counterpoint. The company operates three primary revenue streams: Textron Aviation (Cessna and Beechcraft aircraft for military and civilian markets), Bell Helicopter (producer of the V-22 Osprey tiltrotor for the Marine Corps in partnership with Boeing), and Textron Systems (which manufactures M1117 armored vehicles, LCAC 1000 hovercraft, and the RIPSAW M5 robotic platform).

Valuation Metrics: With a market capitalization of $15.8 billion, Textron trades at 19x trailing earnings and approximately 22.7x free cash flow. Most importantly, the price-to-sales ratio sits just under 1.1x — positioning it as one of the sector’s least expensive options by this measure.

Why It Matters: Unlike Huntington’s single-platform focus, Textron’s diversified product portfolio provides multiple avenues for growth. Its established relationships across Army, Navy, and Marine Corps procurement channels reduce single-contract dependency.

The Investment Case: Why These Two Stand Apart

In a sector where valuation multiples have expanded significantly, both Huntington Ingalls and Textron maintain attractive price-to-sales ratios near or below 1.1x — a level the author considers optimal for defense sector entry. This puts them among the cheapest defense company stocks available on this metric.

Neither company trades as though the geopolitical environment has shifted toward increased military procurement. Yet demand fundamentals point elsewhere: China’s expanding military capabilities, European NATO expansion, and Middle Eastern instability all suggest sustained or growing defense budgets for years ahead.

The new Huntington contract particularly validates this thesis. The Navy’s decision to pursue additional surface combatant designs rather than cancel programs entirely signals confidence in future funding. This represents exactly the kind of catalyst that separates best defense company stocks from mere sector participation.

Making the Choice

Huntington Ingalls offers the more immediate catalyst with a concrete new contract and clear revenue expansion pathway. Textron provides broader diversification and less dependence on any single procurement decision.

For patient investors with $500 to deploy into defense exposure, either represents solid positioning. But between the two, Huntington Ingalls’ new Navy contract and tighter valuation multiple make it the more compelling choice at this moment.