Weighing AeroVironment’s Valuation After Strong Multi Year Share Price Surge
- If you are wondering whether AeroVironment is still a smart buy after its big run, or if most of the upside is already priced in, this article will walk through what the numbers are really saying about its value.
- The stock has pulled back recently, falling 7.6% over the last week and 17.9% over the last month, but it is still up 47.5% year to date and 42.5% over the past year, with a 176.7% gain over three years and 159.3% over five.
- These swings are happening as investors continue to focus on AeroVironment's position in unmanned systems and defense technology, especially as geopolitical tensions keep demand for advanced drones and related systems in the spotlight. The market is essentially trying to decide whether this growth story is only getting started or already well reflected in the share price.
- Our valuation checks currently give AeroVironment a score of 1/6, which suggests the market may be paying up for its strengths. Next, we will break down what different valuation approaches say, and then finish with a more practical way to think about its worth.
AeroVironment scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: AeroVironment Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow (DCF) model estimates what a business is worth today by projecting the cash it could generate in the future and discounting those cash flows back into today's dollars.
For AeroVironment, the latest twelve month Free Cash Flow is negative at roughly $244.7 Million, reflecting heavy investment and some lumpiness in defense contract timing. Looking ahead, analysts and extrapolated estimates see Free Cash Flow turning positive and rising steadily, from about $83.4 Million in 2026 to roughly $682.1 Million by 2035, with $236.7 Million projected by 2028. Simply Wall St uses a 2 Stage Free Cash Flow to Equity model, where the first years use analyst forecasts and the later years are extrapolated growth based on those trends.
Adding up these discounted cash flows gives an estimated intrinsic value of roughly $204.69 per share. Based on current market pricing, the DCF suggests AeroVironment is about 12.7% overvalued, implying that investors are already paying a premium for its long term growth story.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests AeroVironment may be overvalued by 12.7%. Discover 918 undervalued stocks or create your own screener to find better value opportunities.
Approach 2: AeroVironment Price vs Sales
For companies like AeroVironment that are still ramping profitability but already generating meaningful revenue, the Price to Sales (P/S) ratio is often a more reliable yardstick than earnings-based multiples. Investors use it to gauge how much they are paying for each dollar of current sales, with higher ratios usually reflecting stronger growth expectations or a perceived strategic edge.
In general, faster-growing and less risky businesses can justify a higher P/S multiple, while slower growth or more uncertainty should pull that multiple down. AeroVironment currently trades on about 8.37x sales, noticeably above the broader Aerospace and Defense industry average of roughly 3.01x and slightly above its peer group around 8.20x. This suggests the market already views it as a premium growth name.
Simply Wall St also calculates a proprietary Fair Ratio of 3.28x, which estimates what AeroVironment's P/S should be after factoring in its specific growth outlook, profitability, industry, size, and risk profile. This tailored Fair Ratio can be more informative than a simple peer or industry comparison because it aligns the multiple with the company’s own fundamentals. Comparing 8.37x to the 3.28x Fair Ratio indicates that AeroVironment may be trading ahead of what its fundamentals alone might support.
Result: OVERVALUED
PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1460 companies where insiders are betting big on explosive growth.
Upgrade Your Decision Making: Choose your AeroVironment Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of AeroVironment’s future (its contracts, technology, risks, and opportunities) with a concrete financial forecast and a Fair Value that you can compare to today’s share price.
On Simply Wall St’s Community page, used by millions of investors, a Narrative is your story behind the numbers, where you set assumptions for revenue growth, margins, and future earnings, and the platform instantly turns that story into projected cash flows, a valuation, and a clear signal about whether AVAV looks undervalued or overvalued right now.
Narratives are dynamic, automatically updating when new news, earnings, or guidance arrives, so your AeroVironment thesis is always tied to the latest data, and you can quickly see if the gap between Fair Value and price still justifies buying, holding, or selling.
For example, one investor might build a more optimistic Narrative that focuses on international expansion and margin recovery and arrives at a Fair Value closer to the higher analyst targets around $404. Meanwhile, a more cautious investor might emphasize execution risks and margin pressure and land nearer the lower analyst targets around $225. This shows how the same company can support very different but clearly quantified views.
Do you think there's more to the story for AeroVironment? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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