AeroVironment Inc (AVAV): what the price assumes

In the published model solve dated 2026-Q2, anchored at $145.91, AeroVironment Inc (AVAV) is priced for today's economics sustained for ~9.0 years. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-09-07 · Exported: 2026-09-09 · Source: https://boothcheck.com/report/AVAV

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 5: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 9.7% cost of capital; growth searched up to the 25% self-funding ceiling.

How unusual the bet is: n/a

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.7%); the inversion above states its own rate.

Per-Model Detail (n=4)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 10.0%); the trailing year was depressed.

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• AeroVironment is now two businesses stapled together, the small-drone and loitering-munition line it built itself and the counter-drone, directed-energy and space work it bought with BlueHalo on May 1, 2025, which is why revenue rose 141% to $1,976.8 million in the year ended April 30, 2026 while reported profit went the other way.
• One customer sets the ceiling: US government sales were $1,688.7 million of that total, and the 10-K states plainly that U.S. government contracts are generally not fully funded at inception.
• The thing to watch is conversion rather than demand, with bookings of $2.7 billion and a book-to-bill of 1.4 last year and fiscal 2027 revenue guidance of $2.125 billion to $2.225 billion.

Bull Case

Start with how the largest acquisition in this company's history was paid for. BlueHalo arrived on May 1, 2025, roughly doubling the business, and AeroVironment handed over stock rather than borrowing. The share count has compounded about 18.9% a year across the last four years, which is the cost of that decision and it is not small. What it bought, though, was a balance sheet that came through the deal almost untouched. Net debt sits at $115.2 million, the gap between $747.5 million of gross debt and $632.3 million of liquid assets, or about 0.76 times operating profit measured through the cycle. A manufacturer that has just absorbed a company its own size and still owes less than one year of through-cycle profit has kept every option it started with.

That matters because the constraint in this industry right now is not orders, it is the ability to build. Bookings ran at $2.7 billion in fiscal 2026 against a book-to-bill of 1.4. The order book behind that has roughly doubled: the 10-K reports unfunded backlog of $1,457.7 million and $774.6 million as of April 30, 2026 and the prior year end, and management expects that approximately 85% of our backlog will be recognized as revenue during our fiscal year ending April 30, 2027. Backlog is not a forecast. It is work someone has already asked for.

What BlueHalo added was adjacency rather than bulk. AeroVironment's own products fly; the acquired lines detect, jam and shoot down the things that fly, point directed energy at them, and operate in space. A customer buying a drone and a counter-drone system from the same vendor is buying integration it would otherwise have to perform itself. The company's own account of its edge is about tempo instead of scale, aiming to deliver new products, services, and capabilities quickly, efficiently, and affordably compared to available alternatives, which is the right claim to make when the threat you are countering costs a few hundred dollars and changes every eighteen months.

The demand is also not confined to one treasury. The 10-K records that foreign customers, including foreign military sales routed through the Department of Defense, accounted for 28% of sales revenue during our fiscal year ended April 30, 2026. European rearmament and the drone lessons of the last four years are visible in that line, and foreign military sales run on a different budget cycle from domestic procurement, which softens the single-customer problem without eliminating it.

Finally, the economics being asked of the mature business are ordinary rather than exceptional. Roughly a 10% operating margin through the cycle is what the mid-cycle view credits, and among its listed defense peers that is simply where the industry sits: LMT operates at 9.9% and GD at 10.2%, with NOC at 11.6% and LDOS at 12.0%. AeroVironment does not need to be a better manufacturer than the primes. It needs to be as good, on a revenue base that is currently growing several times faster than theirs.

Bear Case

Every dollar of this thesis is downstream of an appropriations bill. Congress writes one each year, and it is under no obligation to write the same one twice. That single external variable, more than competition, more than execution, decides how this ends, and the current quote does not read like it is priced for a bad year of it.

The company says as much in its own risk language. It lists changes in policy or budgetary measures that adversely affect our U.S. governmental agency and foreign government customers among the factors that move results, and notes that U.S. government contracts are generally not fully funded at inception. There is a second regulatory chokepoint on the commercial side: Failure to obtain necessary regulatory approvals from the FAA or other governmental agencies, or limitations put on the use of SUAS, MUAS and C-UAS in response to public privacy concerns, may prevent us from expanding the sales of our SUAS, MUAS and C-UAS to non-military customers in the United States. The civil market that would diversify this revenue is gated by a regulator with its own timetable.

Now set that against what today's quote asks for. The enterprise is valued at roughly 53 times mid-cycle operating profit, and that only holds together if operating profit compounds at the fastest rate the business can fund out of its own cash flows and stays there for about 11 years. The near-term pace is not the stretch. AeroVironment has recently delivered it, and the order book supports more of it. The stretch is the persistence: of comparable fast growers, only about 14% held such a pace for a full decade. A decade is also long enough to contain at least two changes of administration and several budget fights.

The reported figures do not yet resemble a business earning that. Last year's reported operating margin was -24.7%, and the filing is specific about the mechanics: As a percentage of revenue, cost of sales increased from 61% to 75% primarily due to increased amortization and other non-cash purchase accounting expenses and an increase in the proportion of service revenue resulting from the effect of the BlueHalo acquisition, resulting in gross margin decreasing from 39% to 25%. Purchase-accounting amortization is a charge that consumes no cash, so the loss overstates the damage. The mix shift is a different matter. Service work carries thinner economics than hardware, and contract services are now 28% of revenue.

The integration itself is the other live risk, and the filing does not soften it: It is possible that following an acquisition, the integration process could result in the loss of key employees, the loss of customers. Half of this company has been part of it for barely a year. Meanwhile the equity has already paid for the deal, with the share count compounding about 18.9% a year over the last four years, so a holder from four years ago owns a materially smaller slice of a materially larger company. The bull answer is that bookings and backlog validate the combination, and they do for the next year or two. The price is asking about the decade after that.

Valuation

Two numbers frame this one. Reported operating profit for the year ended April 30, 2026 was negative. Mid-cycle operating profit, meaning what the business earns when its own through-the-cycle economics are applied to today's revenue, is comfortably positive. The market is paying roughly 53 times the second figure.

That multiple carries a precise requirement rather than a general optimism. It works if operating profit compounds at the fastest rate the company can fund from its own cash generation and keeps doing so for about 11 years. AeroVironment has recently grown at that pace, so the rate itself is not the demanding part; the duration is. Only about 14% of comparable fast growers sustained such a pace across a full decade. The arithmetic is also unusually rate-sensitive: each additional percentage point of discount rate shortens the horizon the price can support by roughly two years.

The methods used to triangulate the business do not disagree with each other here, which is itself the finding. Every family lands under today's quote. The price sits at about 1.88 times what the asset value methods reach, and at the same distance from the peer multiple methods. The forward growth methods, which are the only ones that credit the revenue ramp, get closest at about 1.34 times. Worth noting what the asset value figure rests on: a reported book value near 88.47 dollars a share, much of which is goodwill and identified intangibles created when BlueHalo was consolidated. An asset floor built substantially out of purchase accounting is a softer floor than the number suggests.

The concrete requirement, then, is a margin one on an income statement that currently shows the opposite. Roughly a 10% operating margin through the cycle is what the business is credited with, while last year the reported operating margin was -24.7%. Most of that gap closes on a schedule written by purchase accounting rather than by demand, which means the reported line will improve for reasons that have nothing to do with winning more work. Against its cohort the credited figure is unremarkable: LMT runs 9.9% and GD 10.2%, with NOC at 11.6%. Revenue of $1,976.8 million in fiscal 2026, of which $1,688.7 million came from the US government, is what those margins would be applied to.

Solvency is the reassuring part of the picture and close to the least relevant. Net debt of $115.2 million against $632.3 million of liquid assets works out to 0.76 times mid-cycle operating profit, and the borrowing capacity behind it is documented: The Amended Credit Agreement provides for an aggregate $700.0 million term loan and an aggregate $350.0 million revolving credit facility. The company is consuming cash today rather than generating it, which the backlog is meant to reverse, and the share count has compounded about 18.9% a year over the last four years. None of that is what decides the outcome. What decides it is whether a decade of compounding at the top of what the business can self-fund actually arrives, and no balance sheet makes that horizon shorter.

Catalysts

The fiscal year that ended April 30 was the first full one with BlueHalo inside it, and the June print showed what that looks like at scale. Fourth-quarter revenue was $641.6 million, up 133% on the prior-year quarter, and full-year revenue was $1,976.8 million, up 141%. Net income for the quarter was $63.2 million, or $1.25 per diluted share, and the company reported bookings of $2.7 billion, a book-to-bill ratio of 1.4, and funded backlog of $1.2 billion. Guidance for fiscal 2027 calls for revenue of $2.125 billion to $2.225 billion. That implied step-up is modest against the growth just delivered, which is a reminder that the prior year's rate was mostly a purchase.

July brought the awards that turn bookings into a trend rather than an event. On July 2, 2026 the company announced a $500 million firm-fixed-price US Army contract for its Titan RF detect-and-defeat system. On July 20, 2026 it announced a $117.3 million US Army production contract for the P550 uncrewed aircraft, supporting the Army's Long Range Reconnaissance program. Counter-drone and long-range reconnaissance are the two lines where doctrine has moved fastest since 2022, and both awards are production rather than development work, which is the harder and more durable kind to win.

The near-term test is throughput. Awards of this size convert into revenue only as fast as the company can staff and build, and it has added two businesses in fifteen months, BlueHalo on May 1, 2025 and Empirical Systems Aerospace on March 16, 2026. The next scheduled read on how much of the order book is turning into shipments is the first-quarter report for the fiscal year ending April 30, 2027.

Peer Cohorts (Per Segment, With Filing Citations)

Uncrewed Systems (UxS) (reported)

• KTOS (Kratos Defense & Security Solutions, Inc.)
• FY2025 10-K: …address these threats for and with our customers and partners is recognized in the industry. We believe that the Company's military grade hardware, software and solution offerings, including jet unmanned aerial drones, rocket and hypersonic systems, C5ISR and air defense systems, jet engine and propulsion systems for…
• FY2025 10-K: …and technical requirements. In addition, a substantial number of our employees are located at our customer locations, or at secure manufacturing and other secure facilities, all of which provides Kratos with valuable strategic insight into our customers' ongoing missions and future program and mission requirements.…
• KRMN (Karman Holdings Inc.)
• FY2025 10-K: …and space programs, utilizing our current integrated design-to-production capabilities and industry partnerships to efficiently develop and deliver innovative solutions. Aided by long-term secular growth trends across our key end-markets and by our ability to meet the increasingly complex design challenges required…
• FY2025 10-K: …a wide variety of existing and emerging programs supporting important Department of War ("DOW") and space sector initiatives. We estimate that no single program accounted for more than 12% of sales in the twelve months ended December 31, 2025 or the twelve months ended December 31, 2024, with revenue from over 130…
• LHX (L3HARRIS TECHNOLOGIES, INC.)
• FY2025 10-K: $23 million recognized in connection with the monetization of legacy end-of-life assets aligned with our transformation and value creation priorities and LHX NeXt driven cost savings, partially offset by unfavorable mix. AR. Our AR segment includes missile solutions with propulsion technologies for strategic defense,…
• FY2025 10-K: …products. CS segment operating income increased in fiscal 2025 compared with fiscal 2024 primarily due to LHX NeXt driven cost savings realized during fiscal 2025 and the absence of a $24 million non-cash charge for impairment of other assets at Broadband Communications that occurred in fiscal 2024 related to the TDL…
• DRS (Leonardo DRS, Inc.)
• FY2025 10-K: …Mission Systems 372,856 Leased 100 North Babcock Street, Melbourne, FL Manufacturing, Engineering, Warehouse, Office Advanced Sensing and Computing 336,287 Leased 6060 Highway, High Ridge, MO Manufacturing, Engineering, Office Integrated Mission Systems 183,600 Owned 4201 Innovation Way, Bridgeton, MO Manufacturing,…
• FY2025 10-K: …Integrated Mission Systems 74,300 Owned 1200 Sherman Street, Dallas, TX Engineering, Office Advanced Sensing and Computing 73,646 Leased 645 Anchors Street, Ft. Walton Beach, FL Manufacturing, Engineering, Office Advanced Sensing and Computing 72,761 Owned 1240 Seesetown Rd., Sidman, PA Distribution, Warehouse…
• LDOS (Leidos Holdings, Inc.)
• FY2025 10-K: …and unissued task orders on sole source IDIQ contracts, to the extent we believe their execution and funding to be probable. Backlog does not include potential task orders expected to be awarded under multiple award IDIQ contracts. We segregate our backlog into two categories as follows: u Funded Backlog. Funded…
• FY2025 10-K: …more than 120 countries, including people scanners, computed tomography carry-on baggage scanners, checked baggage scanners, and explosive trace detectors. We are also the primary supplier to CBP and other 4 Leidos Holdings, Inc. Annual Report Table of Contents PART I international customers of mobile, non-intrusive…

Loitering Munition Systems (LMS) (reported)

• KTOS (Kratos Defense & Security Solutions, Inc.)
• FY2025 10-K: …property and past performance qualifications and by offering a wider range of comprehensive low-cost technology leading and proven products and solutions compared to our competitors. In regard to areas of specialization, our product and solution offerings include the manufacturing of specialized defense electronics;…
• FY2025 10-K: …and technical requirements. In addition, a substantial number of our employees are located at our customer locations, or at secure manufacturing and other secure facilities, all of which provides Kratos with valuable strategic insight into our customers' ongoing missions and future program and mission requirements.…
• LMT (LOCKHEED MARTIN CORPORATION)
• FY2025 10-K: …at very long range and produced for the U.S. Air Force, U.S. Navy, and international customers. Hellfire and JAGM are air-to-ground missile used on rotary and fixed-wing aircraft, which is produced for the U.S. Army, Navy, Marine Corps and international customers. • The Javelin program, which is a one-person portable…
• FY2025 10-K: …and Mission Systems (RMS) and Space. We organize our business segments based on the nature of the products and services offered. Recent regional conflicts have demonstrated the integral role Lockheed Martin products play in protecting people, and we are rapidly transforming our business to meet increased demand. We…
• RTX (RTX CORPORATION)
• FY2025 10-K: …Guidance Enhanced Missiles (GEM-T) and Patriot launchers for international customers and the U.S. Army, $2.1 billion to provide AMRAAM to the U.S. Air Force, U.S. Navy, and international customers, $1.5 billion for low-rate initial production (LRIP) of LTAMDS for the U.S. Army and Poland, $1.2 billion for Iron Dome…
• FY2025 10-K: …of War (DoW) (formerly referred to as the U.S. Department of Defense), including the U.S. Navy, U.S. Army, Missile Defense Agency, U.S. Air Force, and U.S. Space Force, as well as programs with U.S. federal civil customers, and other international and classified customers. In 2025, Raytheon achieved key advancements…
• LHX (L3HARRIS TECHNOLOGIES, INC.)
• FY2025 10-K: $23 million recognized in connection with the monetization of legacy end-of-life assets aligned with our transformation and value creation priorities and LHX NeXt driven cost savings, partially offset by unfavorable mix. AR. Our AR segment includes missile solutions with propulsion technologies for strategic defense,…
• FY2025 10-K: …property damage to us or third parties could also occur. The use of these products in applications by our customers could also result in liability if an explosion, unplanned ignition or fire were to occur. Extensive regulations apply to the handling of explosive and energetic materials, including but not limited to,…
• GD (GENERAL DYNAMICS CORPORATION)
• FY2025 10-K: …wheeled and tracked combat vehicles, weapon systems, energetics and munitions. The segment consists of three business units - Land Systems, European Land Systems (ELS), and Ordnance and Tactical Systems (OTS). Combat Systems creates long-term value through operational excellence - high-quality, on-schedule and…
• FY2025 10-K: …Powder propellant capacity; and continued advancement in solid rocket motor production. These initiatives will strengthen supply chain resiliency and support the full lifecycle of critical defense systems. Revenue for the Combat Systems segment was 17% of our consolidated revenue in 2025, 19% in 2024 and 20% in 2023.…
• NOC (NORTHROP GRUMMAN CORP /DE/)
• FY2025 10-K: …an open architecture system that seamlessly integrates sensors and effectors to deliver among the most advanced C2 systems for joint and coalition forces; • Medium (30mm and 20mm) and Large (120mm) caliber tactical and training ammunition production; • Guided Multiple Launch Rocket System (GMLRS) propulsion and…
• FY2025 10-K: …for the U.S. Navy, Japan, and France; • MQ-4C Triton, which provides wide area strategic ISR over vast ocean and coastal regions for maritime domain awareness to the U.S. Navy and Australia; • RQ-4 Global Hawk, which provides high resolution imagery of land masses for theater awareness and strategic ISR to the U.S.…

MacCready Works (MW) (reported)

• KTOS (Kratos Defense & Security Solutions, Inc.)
• FY2025 10-K: …obligation and then adds an appropriate margin for that distinct good or service. For the majority of contracts, the Company satisfies the underlying performance obligations over time as the customer obtains control or receives benefits as work is performed on the contract. The Company generally recognizes revenue…
• FY2025 10-K: …are scrutinized for compliance with regulatory standards by the Company's personnel, and are subject to audit by the Defense Contract Audit Agency ("DCAA"). From time to time, the Company may proceed with work based on customer direction prior to the completion and signing of formal contract documents. The Company…
• LDOS (Leidos Holdings, Inc.)
• FY2025 10-K: 9 million for fiscal 2025, 2024 and 2023, respectively (see "Note 10-Leases"). CONTRACT ASSETS AND LIABILITIES Performance obligations are satisfied either over time as work progresses or at a point in time. Firm-fixed-price contracts are typically billed to the customer using milestone payments while…
• FY2025 10-K: Income tax expense," as reported in the consolidated financial statements are not allocated to our segments. Other segment expenses include direct program costs such as materials and subcontractor expenses, as well as allocable indirect costs such as depreciation and Corporate compensation expenses, but excludes…
• LHX (L3HARRIS TECHNOLOGIES, INC.)
• FY2025 10-K: _______________________ 89 (iii) Amendment to the L3Harris Technologies, Inc. (formerly known as Harris Corporation) Master Trust, dated December 8, 2009 and effective December 31, 2009, incorporated herein by reference to Exhibit 4(e)(iii) to L3Harris Technologies, Inc.'s (formerly known as Harris Corporation)…
• FY2025 10-K: …19, 2024), incorporated herein by reference to Exhibit 10.4 to L3Harris Technologies, Inc. Quarterly Report on Form 10-Q for the fiscal year ended December 29, 2023, filed with the SEC on July 26, 2024. (Commission File Number 1-3863) *(10)( h ) L3Harris Excess Retirement Savings Plan, as amended and restated…
• BWXT (BWX Technologies Inc)
• FY2025 10-K: …2023-01-01 2023-12-31 0001486957 us-gaap:OperatingSegmentsMember bwxt:NuclearServicesandEngineeringMember bwxt:CommercialOperationsSegmentMember 2025-01-01 2025-12-31 0001486957 us-gaap:OperatingSegmentsMember bwxt:NuclearServicesandEngineeringMember bwxt:CommercialOperationsSegmentMember 2024-01-01 2024-12-31…
• FY2025 10-K: …bwxt:GovernmentOperationsSegmentMember 2025-01-01 2025-12-31 0001486957 us-gaap:OperatingSegmentsMember bwxt:OtherGeographicLocationMember bwxt:GovernmentCustomersMember bwxt:CommercialOperationsSegmentMember 2025-01-01 2025-12-31 0001486957 bwxt:OtherGeographicLocationMember bwxt:GovernmentCustomersMember 2025-01-01…
• DRS (Leonardo DRS, Inc.)
• FY2025 10-K: Wright Street, Madison, WI Manufacturing, Engineering, Office Advanced Sensing and Computing 32,319 Leased 651 Anchors Street, Ft. Walton Beach, FL Manufacturing, Engineering, Office Advanced Sensing and Computing 31,783 Owned 1620 Old Airport Road, West Plains, MO Distribution, Warehouse Integrated Mission Systems…
• FY2025 10-K: …Integrated Mission Systems 74,300 Owned 1200 Sherman Street, Dallas, TX Engineering, Office Advanced Sensing and Computing 73,646 Leased 645 Anchors Street, Ft. Walton Beach, FL Manufacturing, Engineering, Office Advanced Sensing and Computing 72,761 Owned 1240 Seesetown Rd., Sidman, PA Distribution, Warehouse…
• LUNR (INTUITIVE MACHINES, INC.)
• FY2025 10-K: …2025-12-31 0001844452 lunr:IntuitiveMachinesLLCMember 2023-02-13 0001844452 lunr:IntuitiveMachinesLLCMember us-gaap:CommonClassAMember 2023-02-13 0001844452 lunr:PublicWarrantsMember 2023-02-13 0001844452 lunr:PrivateWarrantsMember 2023-02-13 0001844452 2023-02-13 2023-02-13 0001844452 lunr:PrivateWarrantsMember…
• FY2025 10-K: …2025-12-31 0001844452 lunr:SeriesAWarrantsMember us-gaap:FairValueInputsLevel1Member 2025-12-31 0001844452 lunr:SeriesAWarrantsMember us-gaap:FairValueInputsLevel2Member 2025-12-31 0001844452 lunr:SeriesAWarrantsMember us-gaap:FairValueInputsLevel3Member 2025-12-31 0001844452 lunr:SeriesBWarrantsMember 2025-12-31…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.