AVAV Outperforms Industry in the Past Month: How to Play the Stock?

AeroVironment, Inc. AVAV stock has gained 55.1% in the past month, outpacing both the Zacks Aerospace-Defense Equipment industry’s growth of 18.9% and the broader Zacks Aerospace sector’s gain of 7.6%. It also came above the Zacks S&P 500 Composite’s return of 2.4% in the same time frame.

Other industry players, such as Rocket Lab USA, Inc. RKLB and Astronics Corporation ATRO, have also delivered a similar stellar performance in the past month. Shares of RKLB and ATRO have risen 53.1% and 26.4%, respectively, in the said period.

With AVAV posting recent price gains, some investors may feel tempted to buy the stock quickly. However, it is important to assess whether the company’s fundamentals support sustainable long-term growth or if the recent rise is mainly short-lived. Evaluating AVAV’s growth outlook and potential risks can help investors make a more informed decision.

Tailwinds for AVAV

AVAV’s share gains over the past month seem to be supported by its strong quarterly revenues, strategic partnership and some notable contract wins, which together contributed to its investors’ optimism. The company reported its fiscal second-quarter 2026 results in early December, delivering strong revenue growth of 151%, which led to a notable 41% improvement in gross profit margin.

In the same month, AVAV collaborated with PteroDynamics on a joint technology demonstration, showcasing the integration of its electronic warfare sensors on an autonomous vertical takeoff and landing (VTOL) unmanned aircraft system during a U.S. Navy-hosted exercise.

Moreover, AVAV successfully delivered two Joint Light Tactical Vehicle-mounted mobile counter-unmanned aircraft system (C-UAS) laser weapon systems to the U.S. Army as part of its high-energy laser prototyping program. The delivery highlights the Army’s growing focus on directed-energy solutions to counter emerging aerial threats and underscores AVAV’s role in advancing next-generation defense technologies.

Estimates for AVAV’s Sales & Earnings

The Zacks Consensus Estimate for AVAV’s fiscal 2026 sales implies year-over-year growth of 143.5%, while estimates for fiscal 2027 sales indicate an improvement of 17.1%.

The consensus estimate for its fiscal 2026 and 2027 earnings calls for a year-over-year improvement of 5.8% and 28%, respectively.

Valuation

In terms of valuation, AVAV’s forward 12-month price-to-earnings (P/E) is 87.81X, a premium to the industry average of 51.53X. This suggests that investors will be paying a higher price than the company's expected earnings growth compared with its industry average.

Risks to Consider Before Choosing AVAV

AeroVironment faces some industry-specific challenges that could affect its operations. Labor shortages may slow production, delay contract deliveries and make it harder for the company to deliver products in time.

Supply-chain issues are another concern, as limited access to certain components can also disrupt manufacturing, increase costs and affect the timely delivery of systems. Its industry peers, Rocket Lab and Astronics, also face similar production and supply constraints.

Liquidity Position of AVAV

AVAV has a current ratio of 5.08. The ratio, being more than one, indicates that AVAV possesses sufficient capital to pay off its short-term debt obligations.

Its industry peers, Rocket Lab and Astronics, also maintain current ratios above one. RKLB has a current ratio of 3.18, while ATRO holds 2.87.

Wrapping Up

Considering AeroVironment’s premium valuation compared with its industry, investors interested in this stock should wait for a better entry point. However, given the company’s strong growth potential and strong liquidity position, current shareholders may consider holding the stock.

AVAV currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research