Leonardo: A Deep-Value Defense Play with Expanding Cybersecurity and Aerospace Exposure

The defense and aerospace sectors have long been bastions of strategic resilience, but few companies embody the confluence of innovation, geopolitical tailwinds, and disciplined execution as effectively as Leonardo S.p.A. (LDO.MI). With a 10% year-over-year revenue increase in Q2 2025 to $829 million and a 42% surge in net earnings to $54 million, the Italian industrial giant has demonstrated its ability to capitalize on surging demand for advanced defense technologies [2]. This performance, coupled with a 9% year-over-year rise in backlog to $8.6 billion and upgraded 2025 revenue guidance to $3.525–3.6 billion, underscores Leonardo’s positioning as a high-conviction long-term play [2].

Leonardo’s strength lies in its dual focus on cybersecurity and aerospace, two sectors poised for sustained growth amid global instability. The company’s DRS segment, which develops electric power and propulsion systems and advanced infrared sensing technologies, saw revenue rise 21% year-over-year in H1 2025, with EBITA growing 33% due to margin expansion [4]. This aligns with broader trends: Europe’s push for defense autonomy and the U.S. Navy’s reliance on Leonardo’s expertise in programs like the Columbia-class submarine [3]. Such strategic partnerships create a durable moat, reinforced by Leonardo’s state-backed status as a key player in Italy’s national security infrastructure.

Valuation metrics further justify patience for long-term investors. While Leonardo’s P/E ratio of 27.09 exceeds its 10-year average of 11.95 and outpaces peers like Poste Italiane (12.51) and Eni (18.35) [1], its earnings growth and margin expansion (11.6% EBITDA margin in Q2 2025, up 70 basis points year-over-year [2]) suggest the premium is warranted. The company’s P/B ratio of 3.12, above its 10-year median of 1.24 [4], reflects confidence in its asset base and future cash-flow potential. Notably, Leonardo’s free operating cash flow (FOCF) improved to €920–980 million for 2025, driven by the sale of its UAS business and disciplined cost management [4].

Leonardo’s expansion into space and cybersecurity adds another layer of differentiation. Its involvement in satellite communications and secure data networks positions it to benefit from the $1.2 trillion global space economy by 2030 [3]. Meanwhile, its cybersecurity solutions—critical in an era of hybrid warfare—align with European Union initiatives to bolster digital resilience. These sectors, combined with Leonardo’s 8.9% year-over-year order intake growth in H1 2025 (€11.2 billion [4]), highlight a business model that balances near-term visibility with long-term innovation.

For patient investors, the risks are manageable. Leonardo’s net debt of €2.1 billion [4] is offset by a robust backlog and strong cash-flow generation. Its state-backed status ensures access to critical contracts, while its focus on affordability and operational efficiency—emphasized by CEO Alessandro Profumo [3]—mitigates margin pressures. In a sector where geopolitical volatility often drives demand, Leonardo’s diversified portfolio and technical expertise make it a compelling deep-value opportunity.

**Source:[1] Leonardo S.p.A. - PE Ratio [https://www.wisesheets.io/pe-ratio/LDO.MI][2] Leonardo DRS Announces Financial Results for Second Quarter 2025 [https://www.morningstar.com/news/business-wire/20250730208660/leonardo-drs-announces-financial-results-for-second-quarter-2025][3] Leonardo Earnings: Strong Start to 2025 as Capacity Plan Accelerates [https://www.morningstar.com/company-reports/1317487-leonardo-earnings-strong-start-to-2025-as-capacity-plan-accelerates-maintain-eur-6260-fair-value][4] Leonardo's Financial Results 1H2025 [https://www.leonardo.com/en/press-release-detail/-/detail/30-07-2025-leonardo-1h2025-financial-results]