After a 500% increase - is the next rocket stage about to launch? Rheinmetall, Almonty, Hensoldt, and Steyr in focus!

Rheinmetall – Growth hopes are enormous

In February 2022, Rheinmetall received the initial impetus for a completely new orientation of the mechanical engineering group toward becoming a dynamic defense specialist with a European focus. Since then, its market valuation has increased twentyfold, reflecting not only the changed geopolitical landscape but also the extraordinary operational growth spurt the Company is currently experiencing. The main drivers are extensive arms deliveries to Ukraine and billion-dollar procurement programs by numerous NATO countries, which aim to significantly increase their defense budgets. Rheinmetall's involvement in ammunition production and air defense systems is also boosting growth. This establishes the group not only as a beneficiary, but also as a pillar in the reorganization of the European security architecture.

Nevertheless, the future performance of Rheinmetall shares remains difficult to predict, as analysts are also applying new leverage as the share price rises. For example, the P/E ratio for 2025 is high at 62.5, but according to estimates, it will fall to around 22.5 by 2028. With a projected annual growth rate of around 15 to 20%, the major business successes up to 2028 appear to be largely priced into the current share price. Investors who took profits at the high of EUR 1,940 in May may have made a sensible move from today's perspective, as the healthy consolidation continued yesterday with a 3% decline to EUR 1,758. Experts on the LSEG platform nevertheless set a 12-month price target of EUR 1,965. Now good advice is expensive!

Almonty Industries – The rocket is now taking off in the US

Whether it is modern defense technology, civil aviation, or high-performance electronics, many key industries of our time depend on the reliable availability of so-called strategic metals. A recent NATO report highlights twelve particularly critical elements that are indispensable for defense and security technology. At the top of the list is tungsten, an extremely durable, heat-resistant metal with exceptional material properties. It occurs only in limited quantities worldwide, with China currently controlling around 70% of global production.

Investors are now beginning to understand the bigger picture: those who want to be part of this game must look for undervalued commodity companies with strategic substance. While this shift has already brought MP Materials, a prominent representative of rare earths, to the fore in the US, Canadian company Almonty Industries has also recently entered the picture. The Nasdaq listing has now been successfully completed with a placement of USD 90 million, and the share price is now being revalued daily in Germany, Canada, and the US. While MP Materials is strongly supported by US programs and high-tech deals such as with Apple, CEO Lewis Black is already planning the next deals for Almonty. There are already material supply relationships with a US defense contractor, the headquarters are being relocated to the US, and important contacts have been brought on board.

Unlike rare earths, tungsten is truly rare, especially in reliably high-quality supply. Almonty is one of the few Western suppliers with a fully controlled processing chain, several operational mine sites, and the flagship Sangdong project in South Korea. The global market situation is also playing into Almonty's hands, as its main supplier, China, has recently cut its production quotas by around 7%. At the same time, prices are skyrocketing for both APT and ferro-tungsten. Demand from the high-tech and defense industries now significantly exceeds supply, which is inevitably leading to supply bottlenecks. This does not even take into account the EU's recent decision to put 1,000 new tanks into service in the next few years. This inevitably puts Almonty in the sights of larger industrial groups or government commodity security programs.

However, the valuation lags far behind strategic relevance: While MP Materials is valued at over USD 9 billion, Almonty currently weighs in at only around CAD 1.3 billion - only about one-tenth of that amount. This is despite analysts expecting EBITDA by 2028 that is in some cases twice as high as that of MP. If comparable valuation multiples were applied to Almonty, the fair enterprise value would be many times higher. Just yesterday, German research firm Sphene Capital raised its target price from CAD 5.40 to CAD 8.40 per share. The stock is still trading at consolidation levels, but this is likely not to last for much longer.

Hensoldt and Steyr – Very ambitious valuations

Defense company share prices have rallied like crazy in the last few months. This has been driven by geopolitical tensions, rising defense spending, and the ever-present talk of a new era. However, what at first glance appears to be a new growth story often turns out to be speculative exaggeration upon closer inspection. Stocks such as Hensoldt and Austrian engine manufacturer Steyr Motors are now valued based on future projections that far exceed their current performance.

Steyr Motors, for example, a specialist in high-performance diesel engines for military applications, has estimated revenues of around EUR 70 million for 2025; however, its market valuation currently stands at an impressive EUR 318 million. This is accompanied by an expected P/E ratio of over 30, with moderate growth and limited production capacity. The price volatility of recent months, from EUR 30 to over 300 and back again, shows how speculative the market has become. Hensoldt, one of the leading providers of sensor and radar technologies, also impresses operationally with a strong order backlog of EUR 6.93 billion. In the first quarter of 2025, revenue grew by 20% to EUR 395 million. In addition to hardware developments, the Company is also pushing ahead with a software-based defense strategy that enables AI-supported real-time solutions for defense. Nevertheless, the valuation remains ambitious here too: The expected P/E ratio for 2025 is over 56 and even by 2027 it only drops to 36.5. Impressive! In view of the overheated key figures, a healthy correction is more a question of when, not if.

After 1244 days of war in Europe, a new meeting between Ukrainian and Russian negotiators is taking place today in Turkey. The aim is to prepare for genuine peace negotiations, which are expected to begin in China in early September. This is currently bearish news for defense and arms stocks, which have been somewhat overheated. However, even if there is a short-term downturn here, Almonty Industries could still be a clear outperformer in the strategic metals sector over the next 12 to 24 months.