Key Takeaways:
- Defense Scale: Leonardo operates across defense electronics, helicopters, and space with €18 billion in 2024 revenue, positioning the group directly inside multi-year European and NATO defense budgets.
- Price Target: Based on the guided valuation model, the stock could reach €71 by the end of 2027, reflecting expectations for continued defense-led growth and stable execution.
- Upside Potential: The €71 target implies about 21% total upside from the current price of €58, assuming revenue growth and margins hold near modeled levels.
- Annual Returns: That upside equates to roughly 10% annualized returns over the next 2 years, driven by earnings growth rather than valuation expansion.
Leonardo (LDO) is a European aerospace and defense group serving government and institutional customers across helicopters, defense electronics, aircraft systems, space, and cybersecurity, with scale that generated €18 billion in revenue during 2024.
Recent news includes Leonardo’s participation in a consortium awarded the Naples Metro Line 10 project valued at over €600 million, highlighting continued demand for its signaling and defense-linked systems beyond core military programs.
Leonardo delivered operating income of about €1.4 billion in 2024 with operating margins near 8%, showing improved cost control and execution compared with earlier years when margins sat closer to 7%.
Normalized net profit reached roughly €1.2 billion in 2024 that supported the market capitalization of around €34 billion and reinforcing Leonardo’s position as a profitable large-cap defense supplier rather than a turnaround story.
Despite revenue growth, improving profitability, and long-cycle defense demand, the stock still trades around 22 times earnings, leaving open the question of whether current valuation fully reflects the strength of execution now visible in the numbers.
What the Model Says for LDO Stock
We assessed Leonardo using operating recovery, defense positioning, and capital discipline to translate earnings growth into shareholder returns.
Assuming 15.2% revenue growth, 8.5% operating margins, and a 22.1x exit multiple, the model estimates shares reach €71.
That outcome implies 21% total upside from €58 today, equal to roughly 10% annualized returns.
Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for LDO stock:
1. Revenue Growth: 15.2%
Leonardo grew revenue from about €14 billion in 2021 to nearly €18 billion in 2024, showing accelerating momentum as defense orders converted into recognized sales across core programs.
Forward estimates point to revenue approaching €26 billion by 2029, implying a higher near-term growth phase as European rearmament and infrastructure-linked contracts move through execution stages.
This growth outlook is supported by multi-year government backlogs but constrained by program timing, political procurement cycles, and limited exposure to short-cycle commercial demand.
According to consensus analyst estimates, a 15% revenue growth assumption reflects elevated defense demand near-cycle peaks while acknowledging that such growth rates moderate as program delivery matures.
2. Operating Margins: 8.5%
Leonardo’s operating margins improved from roughly 7% in 2021 to about 8% in 2024, reflecting better cost control and reduced pressure from legacy aerostructures programs.
Electronics, cybersecurity, and systems integration continue to outpace group averages, gradually lifting blended margins as higher-value content represents a larger share of revenue.
Margin expansion is tempered by labor intensity, government pricing frameworks, and ongoing investment requirements tied to complex defense platforms.
In line with analyst consensus projections, normalized operating margins around 9% balance incremental efficiency gains with structural limits typical of large-scale defense contractors.
3. Exit P/E Multiple: 22.1x
Leonardo currently trades near the low twenties on forward earnings, reflecting improved earnings visibility alongside lingering caution around execution risk and political exposure.
Historically, the stock has commanded lower multiples during periods of margin volatility and higher multiples when earnings trajectories stabilized and cash generation improved.
A sustained multiple near current levels requires continued delivery on profit growth, stable free cash flow, and no material deterioration in defense spending commitments.
Based on street consensus estimates, a 22x exit multiple reflects balanced expectations that earnings recovery continues without assuming a material re-rating beyond recent trading ranges.
What Happens If Things Go Better or Worse?
Leonardo’s outcomes depend on defense program execution, margin discipline, and whether valuation remains supported by earnings visibility. Here is how Leonardo might perform in different scenarios through 2027:
- Low Case: If defense order timing slips and execution stays conservative, revenue growth cools from recent momentum while margins hold near current levels, keeping valuation steady → 4.9 % annualized return.
- Mid Case: With defense deliveries tracking plan, revenue growth of 7.9% and margins stabilizing t0 7.9% → about 11% annualized return.
- High Case: If program execution improves faster with revenue growth peaks at more than 8% with higher-margin electronics scale more quickly at 8% → 16.2% annualized return.
Leonardo has transitioned from recovery into steadier execution, with improving profits and clearer backlog conversion reducing downside compared with prior cycles.
At current fundamentals, the €71 target appears achievable if revenue growth and margins track expectations and valuation remains anchored near present levels.
How Much Upside Does It Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
