The accelerated growth of military spending in Europe has led to record evaluations for the companies in the defense sector, reaching levels comparable to those of luxury brands dedicated globally.
The actions prices in the defense sector come from the luxury industry giants. Photo archive
An previously perceived domain as being low margins is considered a real growth opportunity in investment portfolios. The demand from the investors is so strong that it exceeds the pace with which analysts manage to adjust their estimates. Freedom24, the trading platform that offers Romanian investors Direct access to international scholarships analyzes this trend.
The actions of the German manufacturer of tanks and ammunition Rheinmetall AG have almost doubled since the beginning of 2025. According to Bloomberg, the company's evaluation, calculated based on anticipated profits, now places it between the luxury industry LVMH and Hermès, famous for Birkin's bags. Other European defense companies – such as Thales from France and Leonardo in Italy – have registered important increases. The wave of enthusiasm is fueled by Germany's commitment to allocate hundreds of billion euros for defense, a direction that the leaders of the European Union also seem determined to follow.
The increased enthusiasm of investors has led to the launch of Wisdomtree Europe Defence UCITS ETF, the first fund traded on a stock market dedicated exclusively to the European defense sector. Listed on the scholarships in Milan, Frankfurt and recently at London Stock Exchange, this ETF brings together 20 active European companies in the production of civil and military, electronic defense and spatial technology. The fund applies a policy of rigorous exclusion, avoiding investments in companies involved in the manufacture of prohibited weapons at international level, such as dispersion ammunition or antipersonal mines. Rheinmetall holds the highest weight in the portfolio (18%), followed by Leonardo (15%), Saab from Sweden and Bae Systems in the United Kingdom (10%) and Thales in France (9%).
“Six months ago, few were expecting such an evolution in the European defense sector. Today, the perspective is completely different. Although the evaluations may seem high at first glance, this happens only because the markets have not yet completely included the forecast growth of profits. If a two -digit growth will be confirmed – what we consider realistic – the current assessments will be justified”Explains Maxim Manturov, Head of Investment Research at Freedom24.
However, some analysts warn that shares prices may already be overvalued, especially given that Rheinmetall titles have been appreciated more than 10 times from February 2022. Last week, analyst Christian Kers from Warburg Research has relegated the shares of the company from “Buy” to “Hold”, arguing that the current price is already reflecting estimates on increasing military budget to 3% of GDP. “In this context, we recommend investors to mark profits,” he said.
However, important banks such as Goldman Sachs and JP Morgan Chase believe that the growth potential for European defense actions has not been exhausted.
“European defense companies begin to look expensive even compared to American ones, but growth expectations are so high that current assessments remain sustainable.”the analysts from Goldman Sachs wrote. JPMorgan analysts added “We remain optimistic about the defense sector, even in the event of an armistice between Ukraine and Russia.“
