Over 100% gains! Better than RENK and DroneShield shares? NATO contract for drone insider tip: Volatus Aerospace!

NATO member backs Volatus Aerospace

Volatus Aerospace shares remain an insider tip. Although the Canadian drone specialist's stock has more than doubled since the beginning of June, its valuation is anything but high compared to other beneficiaries of NATO's billions.

The Canadian company's growth opportunities became clear again on Wednesday. Volatus announced that it had received an order for training in drone operations and sensor use as part of its aerial reconnaissance services. From the Company's perspective, the order highlights its role as a reliable provider of mission-critical capabilities for government programs. The order volume is CAD 560,000 and is expected to offer a high margin. Volatus CEO Glen Lynch commented: "We are proud to contribute to the operational readiness of Canada and its allies by providing advanced drone and sensor training."

In addition to training, Volatus Aerospace, founded in 2018, offers a wide range of services related to training and cargo transport with its own fleet of drones, aircraft, and helicopters. The drone business is a clear growth driver. These are state-of-the-art aircraft from various manufacturers, equipped with ultra-HD optics, LiDAR technology, and AI-controlled pattern recognition. The range of applications is huge: borders, military areas, war zones, industrial facilities, buildings, bridges, and pipelines.

Revenue is expected to increase by more than 50% in the current year, although growth is being slowed by the switch to "Western" drone software and hardware. With locations in Canada, the US, and Europe, the Company is excellently positioned to benefit from rising spending on protection and reconnaissance of military infrastructure and border areas.

Analysts at Ventum Capital Markets believe Volatus will generate around CAD 45 million in the current year. Next year, this figure is expected to rise to CAD 72.5 million and to more than CAD 83 million by 2027. The experts emphasize that these estimates are conservative and that there is potential for significantly better performance.

DroneShield: Valuation utopian?

While Volatus generates revenue through the use of drones, DroneShield earns money from combating them. The Australian company offers specialized security solutions for the detection and defense against drones, particularly in military, government, and critical infrastructure settings. Its product portfolio includes radar, radio, and AI-powered systems designed to identify unmanned aerial vehicles at an early stage and neutralize them if necessary.

Like Volatus, DroneShield's stock has also roughly doubled in value over the past month. The Company is now worth an impressive AUD 2.15 billion on the stock market. Orders in Europe were recently reported. According to these reports, orders for military counter-UAS systems have a volume of USD 61.6 million and are expected to be delivered in the third quarter, thus also contributing to revenue. For context: The Company generated revenue of USD 57.5 million in 2024 as a whole. The valuation, therefore, appears ambitious.

As with many defense stocks, investors are betting on a golden future. DroneShield is expected to generate significantly more than USD 100 million in revenue in the current year. Its sales pipeline is reportedly worth around USD 1.2 billion, which makes the Company's market capitalization seem not quite so utopian.

RENK: Investing in growth

RENK is, of course, one of the beneficiaries of NATO's billions. The Company is known worldwide for its high-performance transmissions for the Leopard 2, but also for other combat and wheeled armored vehicles. High-performance transmissions are specialized gearboxes that must meet extreme performance requirements, especially in military, industrial, or maritime applications.

The order backlog is currently growing rapidly. Most recently, orders worth around USD 250 million were reported in the marine gear sector. And in the US, orders worth between USD 100 million and USD 150 million were secured. The main business is in Germany and Europe: in talks with Reuters, the management board was extremely optimistic. The German Armed Forces alone plans to procure up to 1,200 combat and armored personnel carriers and 1,000 wheeled armored vehicles by 2035. To put this into perspective, the German Armed Forces currently has around 1,000 combat and armored personnel carriers.

This huge demand outlook provides RENK with a long-term basis for investing in its own plants, both in machinery and in research and development. Around EUR 500 million is to be invested in this area in the coming years.

RENK shares have gained around 240% in the current year and are currently trading at around EUR 63. The market capitalization is EUR 6.4 billion. In 2024, revenue amounted to around EUR 1.14 billion. In recent weeks, there has been a much-needed consolidation. As a result, the share price has lost around 22% of its value in the past four weeks.

All three stocks are benefiting from the defense boom. Volatus shares are significantly cheaper and do not carry any hardware development risk. The Company selects the best drone partners and focuses on software and services. This is significantly less capital-intensive and generally offers high margins. DroneShield appears to be very ambitiously valued. On the other hand, drone defense is likely to be a billion-dollar market in the coming decades. It is difficult to assess where the Australians stand in terms of technological competition. RENK is growing in response to the demand for tanks and other heavy equipment. In the medium term, it would make sense to build up further pillars of business.