Elbit Systems: The Steadiest Performer in the Top 100 Stocks to Buy

Israel-based Elbit Systems (ESLT) fell two places in Barchart’s Top 100 Stocks to Buy on Monday, into the 84th spot. 

The maker of night vision systems, UAVs (unmanned aerial vehicles), and various other defense technology solutions for military, homeland security, and commercial applications may be the steadiest performer of the 100 names on Barchart’s list. 

More Top Stocks Daily: Go behind Wall Street’s hottest headlines with Barchart’s Active Investor newsletter.

 

ESLT stock has a beta of 0.31, one of the lowest in the top 100. Over the past five years, it’s gained 194%. While that’s good--it has outperformed both the S&P 500 and Nasdaq 100 indexes by a significant amount--what’s more impressive is the way it’s done it. 

Although the company’s history dates to 1966, it was its predecessor company’s (Elbit Ltd.) corporate demerger into three separate companies in 1996 that created Elbit Systems, and its focus on the defense industry. 

Since listing on the Nasdaq on November 27, 1996, its shares have appreciated by 5,255%, a compound annual growth rate of 15.1% over 28.5 years. I don’t have to calculate the index’s return to know that ESLT stock vastly outperforms the S&P 500 over the same period. 

The steadiest performer of the current top 100 stocks to buy, here’s why it ought to keep outperforming the index.

The Stock’s Near-Term Performance Remains Outstanding

The stock’s weighted alpha is 131.42, higher than its 12-month return of 125.25%. The weighted alpha is skewed toward its more recent performance. Its shares are up 61% year-to-date.

The company gets very little coverage from Wall Street. According to MarketWatch, three analysts cover the stock, with none rating it a Buy. S&P Global Market Intelligence confirms this lack of coverage. 

The stock’s average volume is 166,360. There are 125 companies in the S&P 500 with market caps less than Elbit’s at $19.54 billion. Of those, only one of the 125 has a 20-day average volume of less than 166,360. 

This suggests ESLT’s small volume has a significant impact on the share price’s movement. Between its May 22 close and June 4, Elbit’s shares appreciated by 14.1%. The highest daily volume over these nine days was 611,800, recorded on May 22, two days after the company reported healthy Q1 2025 results. 

Interestingly, its shares fell for two consecutive days before heading on its next leg higher. Keep in mind that the low volume affects prices in both directions. Should it report a poor quarter in the near future, the lack of buyers would certainly put significant downward pressure on its share price. 

A Share Price Collapse Doesn’t Appear Imminent

Elbit reported an order backlog of $23.1 billion as of the end of the first quarter. Based on its trailing 12-month revenue of $7.17 billion, it will take approximately three years to deliver on that backlog. That's an impressive problem to have.

From a geographic standpoint, Elbit’s revenues are well-diversified, with Israel accounting for 32.1% of its Q1 2025 revenue of $1.90 billion, while North America (20.7%), Europe (24.1%), and the Asia-Pacific region (18.1%) account for the remainder. Not being overly reliant on the U.S. is beneficial in the current economic environment. 

Elbit has five operating segments: Land (27.4% of revenue), Aerospace (24.6%), ESA (19.7%), ISTAR and EW (17.6%), and C4I and Cyber (10.7%). Approximately 90% of its revenue is derived from defence-related activities.

The revenue contribution from Israel in the first quarter increased by 300 basis points due to increased demand from the Israel Ministry of Defense (IMOD). That’s due to the war in Gaza, with its two most significant segments by revenue (Land and Aerospace) generating large munition-related orders from IMOD. That could continue for the foreseeable future.

In terms of profitability, its adjusted net income in the first quarter was $117.2 million, representing a 45.2% increase from Q1 2024, with a 6.2% net margin, 100 basis points higher than the same period last year.

The best thing you can do as an investor when it comes to Israel is to assume that the increased revenues will slow sooner rather than later. At least, that’s the hope anyway. 

Based on the few analysts covering ESLT stock, it currently trades at 47 times its 2025 earnings per share estimate of $8.93 and 32 times the 2026 estimate. 

A Nosebleed Valuation

Its P/E multiple has never been higher. In March 2006, Elbit’s P/E multiple for the latest 12 months was approximately 22 times. In March 2015, it was even lower, at 17 times earnings. Today, it is 53 times earnings. That leaves little room for error. 

Two decades ago, it traded at a multiple of slightly more than one times sales. Today, it approaches three times the revenue. So, one must consider whether this multiple expansion is justified. 

Here in Canada, where I live, Prime Minister Carney has recently said that Canada will increase its defense spending to 2% of GDP, the NATO target, by the end of fiscal 2026 (March year-end). 

Globally, countries are increasing their defense budgets. If ever there were a time to deserve a higher multiple, now would be the time.   

Despite the impressive gains over the past five years, it’s hard to imagine the gravy train ending anytime soon, regardless of the state of the economy. 

If you don’t have a problem investing in companies whose products contribute to the killing of human beings, Elbit Systems ought to be high on your watchlist.