Amid rising global tensions, top defence stocks have come into favour. The best growth stocks to buy now from the sector are:-
Austal Limited (ASX: ASB)
Austal Limited operates globally as a shipbuilder and defense prime contractor, specializing in the design, construction, and sustainment of sophisticated commercial and defense vessels. The company has a presence in Australia, the United States of America, the Philippines, and Vietnam, with service centers worldwide.
Austal, one of the top growth stocks, has a strong order book which is valued at $14.2B as of 31 December 2024. This includes contracts for US naval programs such as the Offshore Patrol Cutter program for the US Coast Guard and T-AGOS ocean surveillance vessels for the US Navy. Austal’s commercial vessel contracts include an agreement with Sweden’s Gotlandsbolaget to design and build a 130-meter high-speed vehicle and passenger ferry that uses a combined cycle and is ‘hydrogen-ready.
Austal's financial performance in the first half of FY2025 shows strong growth. The company reported revenue of $825.7M showing a 15.1% increase from the previous year. This growth is driven by significant contributions from US shipbuilding. EBIT was $42.7M, up from $32.1M in the first half of FY2024 with improved margins. Net profit after tax increased by 108.9% to $25.1M.
To support its growth and expansion, Austal has undertaken strategic financial activities. This involves an institutional placement aimed at raising $200 million to fund the expansion of its shipbuilding capacity in the United StatesAustal is also progressing with a Strategic Shipbuilding Agreement (SSA) with the Commonwealth Department of Defence. This move is expected to add further defense project opportunities in Australia.
Electro Optic Systems Holdings Limited (ASX: EOS)
Electro Optic Systems develops cutting-edge technology aimed at both international and Australian space and defense sectors. The company has shifted its emphasis towards high-growth areas specifically counter-drone products. This includes remote weapon systems and high-energy laser weapons as well as space control products and services. This decision was made in response to the increasing use of drones in modern warfare and the growing demand for effective counter-drone technologies.
The Company has achieved its highest ever total annual revenue in 2024. The Group, however, posted a $38.5M loss before tax and had a $30.4M net cash outflow from operating activities. Despite this financial result EOS finalized the sale of its naval satellite communications business EM Solutions to Cohort Plc for $144M in January 2025. This divestment improved EOS's financial standing enabling the company to repay its debt and concentrate on its core businesses with a stronger balance sheet.
The Company is actively developing and delivering counter-drone solutions including the Slinger system which has seen success in Ukraine. The company is also working on next-generation remote weapon systems such as the R500 and developing its high-energy laser weapon technology. EOS's strategy includes expanding its market reach and pursuing new contracts in North America and other regions.
DroneShield Limited (ASX: DRO)
DroneShield is specializing in artificial intelligence-based counter-drone (C-UxS) and electronic warfare solutions for military, government, law enforcement, and critical infrastructure clients. The company, among high growth stocks, has experienced significant revenue growth with 1Q2025 revenues reaching $33.5M. A 102% increase compared to 1Q2024. This growth is further highlighted by committed purchase orders for 2025 delivery totaling $94.4M, already surpassing the entire FY24 revenue of $57.5M.
DroneShield is in a strong position. Cash receipts have also seen a substantial rise with 1Q2025 showing $16.7M. A 135% increase year-over-year. The company holds a significant cash balance of $197M as of April 2025 enabling ongoing investments in technology, acquisitions, and expansion. DroneShield is also increasing its emphasis on software as a service (SaaS) with SaaS revenues up by 198% in 1Q2025. The company also has plans to launch more SaaS-based solutions.
DroneShield is actively expanding its operational capabilities. The company is increasing its team particularly in engineering, and expanding its Sydney facility to support higher production volumes. It's also pursuing global expansion with a focus on establishing a stronger presence in Europe to capitalize on increased defense spending and demand in the region.
(Source: Company Announcements)
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