r/stockmarket
Rheinmetall (RHM): Market just handed out a discount?
Rheinmetall (RHM) trades at a low PEG despite massive EPS growth from European rearmament, offering a rare valuation discount.
- Projected EPS to more than double by 2027, with a PEG ratio of 0.5-0.6 indicating severe undervaluation compared to growth.
- Strong macro tailwinds from German rearmament, NATO budget increases, and ammunition demand exceeding production capacity.
- Massive operating leverage as new production lines come online, supporting management's €20B revenue target by 2027.
- Defense spending could slow down or governments might delay procurement programs.
- The Ukraine conflict might de-escalate faster than expected, reducing the urgency for military buildup.
- Current aggressive earnings growth forecasts may prove too optimistic.
Everyone is panicking over the recent pullback, but the fundamentals don't seem to care.
At around €930/share, Rheinmetall is trading at what looks like a growth-stock valuation for a company whose earnings are projected to explode over the next two years.
The numbers are wild:
2025 EPS: \~€18.5
2026 EPS estimate: \~€28.5 (+54%)
2027 EPS estimate: \~€38.5 (+35%)
That's basically a doubling of earnings in just two fiscal years.
Yet despite that growth, RHM's PEG ratio sits around 0.5-0.6, which is typically the territory investors dream about finding.
For comparison:
Most quality industrials trade PEGs above 1
Many AI names trade PEGs well above 2
Rheinmetall is growing earnings at roughly 40%+ annually while trading closer to a mature industrial than a hyper-growth company
What is Wall Street missing?
The market seems obsessed with short-term headlines and contract wins/losses.
Meanwhile:
Germany is rearming
NATO members are boosting defense budgets
Ammunition demand remains far above production capacity
Rheinmetall's backlog keeps expanding
Management is targeting \~€20 billion revenue by 2027
Revenue path:
€10B → €14B → €20B
And because defense manufacturing has massive operating leverage, every new production line coming online drops more profit to the bottom line.
The really interesting part?
The recent selloff happened while analysts are still forecasting earnings growth that most software companies would envy.
If EPS reaches \~€38.5 by 2027 and the market is willing to pay even 25x earnings, you're looking at a business worth materially more than today's price.
The bear case:
Defense spending slows
Ukraine conflict de-escalates faster than expected
Governments delay procurement programs
Current growth forecasts prove too optimistic
The bull case:
Europe has underinvested in defense for decades and is only in the early innings of rebuilding military capability.
If that's true, Rheinmetall isn't a wartime trade.
It's a decade-long rearmament story.
The question isn't whether Rheinmetall can grow.
The question is whether the market is massively underestimating how long this growth cycle lasts.
Am I missing something, or is this one of the most attractive PEG-adjusted opportunities in the European market right now?
Those growth prospects are already priced in. The stock went from 100 to 1400 on those revised estimates.
Nah, this is momentum running the show. The growth in DRAM is already priced in but FOMO retail runs the show now. Miners, defence is not the play right now.
forward Pe went from 22 in 2024 to 35 in 2026
European governments won't cut their social programs sufficiently to fund prolonged defence spending increases.
But they do love taking debt
European countries can't rely on the US anymore and need to build up their own militaries. I don't see that ending anytime soon
While that is true, i don't believe the growth will be reflected in the stock price. The moment the war in ukraine shows signs of stopping or slowing, rheinmetall will crater, and will bounce based off of news from diddy trump threatening greenland on his whims.
Imo, its not a terrible investment on a horizon of 10 years but there are definitely better opportunities right now.
They removed the debt brake specifically for defense investments last year.
There is a simple argument for Rheinmetall. Germany is one of the G20 countries with the least national debt (1/2 of US and 1/4 of Japan) and best credit rating. It can simply get as much credit for defence build up to counter the Russian threats as its needs- without killing the social peace in the country. In stark contrast to France and UK. Rheinmetal as largest German Defence contractor is the biggest recipient. Beside the managment if RHM is outstanding clever.
P.S. Im invested and conviced and bought more yesterday.
The cancelled naval frigate contract is a strategic black eye, but it is financially minor. The naval division accounts for less than 10% of Rheinmetall's footprint. The core pillars of the company—ammunition production and armored land vehicles (like the Puma and Lynx) are backed by a staggering, record-high €73 billion order backlog. This provides nearly a decade of
The stock has suffered a 36% drawdown in 2026. It is now a classic "bad news is priced in" scenario. If they hit their revised full-year revenue targets of €14 billion–€14.5 billion, the bounce-back could be aggressive.
Independent research firms like Morningstar maintain a high-conviction "Top Pick" status for Rheinmetall, setting an intrinsic fair value estimate at €2,380. They note that the sell-off ignores structural European rearmament realities.
Short term it handed you a knife, blade first
I always panic when my "safe" stocks plummet 20% or more. I panic even more when my gambles (micron et al) go up 15% in a day due to opportunity cost. This is a gamblers market and Rheinmetal is a 5 of clubs (I am actually a fan, but it is a hard investment atm). I hope you are right and make a bundle.....
They un-did that last year. It was a big story.
You're mistaken is pretty clear isn't it?
They can finance military spending by taking loans. Pretty easy.