Rocket Lab (RKLB): Is the Space Sector's Rising Star Still a Buy at Its Current Valuation?

The space industry has long been a magnet for speculative fervor, and Rocket Lab (RKLB) has emerged as one of its most hyped darlings. Yet, as the company's stock trades at a stratospheric price-to-sales (P/S) ratio of 72x and a price-to-book (P/B) ratio of 23.1x-far exceeding the aerospace and defense industry averages of 6.83x and 11.4x, respectively-the question of valuation realism versus hype-driven momentum grows increasingly urgent. With RKLB's Q4 2025 revenue guidance of $170–180 million and a $1.1 billion backlog, is the stock still a buy, or has the market overextended its optimism?

A Premium Built on Growth, Not Profitability

Rocket Lab's financials paint a mixed picture. While the company reported a 48% year-over-year revenue increase in Q3 2025, driven by its Space Systems segment, its earnings remain deeply negative. As of December 1, 2025, RKLB's forward P/E ratio stands at -106.24, reflecting an earnings per share (EPS) of -$0.03 in Q3 and a projected -$0.38 in Q4 2025 (). This unprofitability is compounded by an EV/EBITDA ratio of -146.61, a metric that places the stock in the "strongly undervalued" category only if one ignores the absence of positive cash flows ().

The disconnect between growth and profitability is stark. For every dollar of revenue generated, RKLB commands a valuation 72 times higher than its sales-a multiple that dwarfs even the most optimistic projections for its peers. Data from December 2025 indicates that the broader aerospace and defense sector trades at a P/B ratio of 6.83, while RKLB's 23.1x ratio suggests investors are paying a 233% premium for its book value (). This premium, however, is not justified by earnings but rather by the hope that Rocket Lab's backlog-57% of which is expected to convert to revenue within 12 months-will eventually translate into profitability ().

Industry Benchmarks: A Mixed Landscape

The aerospace and defense sector itself is evolving. Public-market TEV/EBITDA multiples for the sector held at 11.4x in Q3 2025, down from 13.6x in Q1 but still above the Q3 2024 low of 8.9x (). This resilience is driven by long-cycle defense demand and the integration of AI and digital engineering in areas like predictive maintenance and unmanned systems. Defense contractors have seen EBITDA multiples rise by 9.7% year-to-date, reflecting investor confidence in their technological edge ().

Yet Rocket Lab's valuation diverges sharply from these trends. While its gross margins improved to 34% in Q3 2025 (with management guiding for 37–39% in Q4), the company's financial metrics remain outliers. Its P/S ratio of 72x is 328% above the industry average of 17.06 (), and its P/B ratio of 23.1x is more than three times the sector's 6.83 (). These figures suggest that Rocket Lab is being valued not as a traditional aerospace player but as a speculative bet on the democratization of space access-a narrative that may not hold if its margins fail to translate into profits.

The Hype Factor: Backlog vs. Execution Risk

Rocket Lab's $1.1 billion backlog is a double-edged sword. On one hand, it provides visibility into future revenue and underscores demand for its Electron rocket and satellite systems. On the other, it exposes the company to execution risks. For instance, delays in converting backlog to revenue or rising production costs could erode margins and force further dilution-a scenario that would exacerbate its already stretched valuation.

Moreover, the company's reliance on non-GAAP metrics to highlight gross margins of 43–45% in Q4 2025 raises questions about the sustainability of its financial reporting. While GAAP-based margins are expected to improve to 37–39%, the gap between GAAP and non-GAAP figures highlights the need for caution. Investors must ask: Are these improvements driven by operational efficiency, or are they the result of accounting adjustments?

Valuation Realism: A Tenuous Balance

The key to Rocket Lab's investment case lies in its ability to bridge the gap between revenue growth and profitability. While its 47.97% revenue growth in 2025 is impressive, it is not uncommon in high-growth tech sectors. What sets RKLB apart is the extreme premium investors are willing to pay for this growth. For every dollar of EBITDA the company generates (or fails to generate), its valuation multiples remain detached from reality.

A critical test will come in 2026, when Rocket Lab's backlog conversion and margin expansion will be scrutinized. If the company can achieve positive EBITDA and demonstrate consistent profitability, its valuation could be justified. However, given its current EV/EBITDA of -146.61 and P/E of -106.24, the path to profitability remains uncertain.

Conclusion: A High-Risk, High-Reward Proposition

Rocket Lab's stock is a study in contrasts: a company with a compelling growth story and a $1.1 billion backlog, yet trading at multiples that defy conventional valuation logic. While the aerospace and defense sector's resilience offers some tailwinds, RKLB's metrics suggest it is being valued more for its potential than its performance.

For investors, the decision hinges on risk tolerance. Those who believe in the long-term democratization of space and Rocket Lab's role in it may find the current valuation justified. However, for those prioritizing valuation realism, the stock's extreme multiples and lack of profitability present a formidable hurdle. Until Rocket Lab can demonstrate that its growth is not just a function of hype but a sustainable business model, the question of whether it is a buy remains unanswered.