Jim Cramer on Leonardo DRS: "I Like Leonardo DRS"

Leonardo DRS, Inc. (NASDAQ:DRS) is one of the 13 stocks recently discussed by Jim Cramer. While Cramer highlighted a few positives of the company during the episode, he made sure to mention that the stock is a “little pricey”.

“.. So the business is sound, the numbers are good. So then we have to ask, what's the bull case for sticking with the stock? Keep in mind, Leonardo DRS is now up 46% for the year to date and up 83% over the past 12 months, meaning you're not exactly early here. That said, management's pretty optimistic about the future…

It doesn't hurt that Leonardo DRS paid its first-ever dividend just this year. While a quarterly payment of 9 cents and a 0.8% yield may not turn any heads, it's certainly a signal, right, that management's confident about its outlook, commitment to returning capital to shareholders.

… So where do I come out on this one? If Leonardo DRS were still in the mid-30s, I'd be pounding the table, but now it's at $47 and change. Like the other small mid-cap defense contractors, it's had a huge run this year, and the stock now sells for over 37 times estimates. Paying too much for those earnings. That's a little pricey for the company that's on track to grow earnings at roughly 17% clip. I'm willing to double that, say pay 34 times earnings, but it's a stretch.

Here's the bottom line: I like Leonardo DRS, the company. I think it's exactly the kind of defense contractor that can work in this environment. But the problem is it has been working. It's very, very well where it is. Alright, if you don't own it already, I’d wait for a meaningful pullback before you start a position. Yes, if you have to, buy a little here, but then you gotta wait for it to come down because it has had such a big run.”

Leonardo DRS (NASDAQ:DRS) develops defense electronics, sensing systems, and power technologies, and it provides products and services that support military operations, situational awareness, and mission-critical decision-making across various platforms.

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Disclosure: None. This article is originally published at Insider Monkey.