Rheinmetall AG (RHM in the EU, RNMBY in the US) is a leading European defense company, and I believe it’s a strong buy for several reasons. The rearming of Europe, driven by geopolitical tensions and increased defense spending, positions Rheinmetall for significant growth. Below, I’ll provide a detailed analysis of the company’s fundamentals, industry trends, technical outlook, and analyst opinions to support this thesis.

Introduction

Rheinmetall is at the forefront of the European defense industry, benefiting from a paradigm shift in military spending across the continent. With Germany and other European nations ramping up their defense budgets, Rheinmetall is primed for substantial growth. This post will explore why the stock remains undervalued despite recent gains and why I expect it to continue rising.

Fundamental Analysis

Rheinmetall’s financial performance is impressive and reflects the growing demand for military equipment:

• Revenue Growth: The company reported a 16% revenue increase in Q1 2025, reaching approximately €2.1 billion, driven primarily by its defense sector. This growth is expected to continue, with full-year revenue projected to rise by 10-15% source.
• Order Book: Rheinmetall’s order book is currently at a record level, exceeding €62 billion. This significant increase is driven by the European rearmament trend, with the company expecting orders to potentially reach €300 billion in the next five years according to the CEO Armin Papperger.
• Production Expansion: The company is heavily investing in expanding production capacity to meet demand, acquiring and converting facilities across Europe source.
• Undervaluation: Despite its growth, Rheinmetall trades at a price-to-sales ratio of under 5, which is significantly lower than its American peers, indicating it is still undervalued.

CEO Armin Papperger has emphasized the company’s focus on strengthening supply chains and scaling production to meet the rising demand for military equipment, especially in light of ongoing geopolitical tensions.

Industry Trends

The European defense industry is undergoing a major transformation, driven by several key factors:

• Rearming of Europe: Germany has increased its military spending to 3.5% of GDP and may raise it further to 5%, in line with NATO’s recommendations. Most European countries are currently at 2%, but spending is expected to more than double over the next decade.
• Geopolitical Tensions: The war in Ukraine and threats from Russia have accelerated defense spending. The EU recently allocated €150 billion for defense, and the UK is also ramping up its military investments.
• NATO’s Push for Higher Spending: NATO Secretary General Mark Rutte has called for a “quantum leap” in defense capabilities, specifically highlighting the need for a 400% increase in air and missile defense systems source.
• Consolidation in the Defense Sector: The European military industry is expected to consolidate over the next decade, which could improve margins and efficiency for companies like Rheinmetall.

These trends suggest that Rheinmetall will continue to see strong demand for its products, particularly in areas like munitions, vehicles, and air defense systems.

Technical Analysis

From a technical perspective, Rheinmetall’s stock has shown a clear bullish trend, as evidenced by its 1-hour chart on TradingView:

https://preview.redd.it/ga7ebmygby8f1.png?width=1500&format=png&auto=webp&s=d3a850c55684d1f55f29621482fd38dcd4bf01a8

• Price Movement: The stock reached a high of €1,750 in late April, consolidated, retested the €1,500 level (a previous resistance turned support) in early May, and then broke through €1,750 in late May to hit a new high of €1,950 in mid-June. It’s currently consolidating around €1,718.5 (down 1.24% as of the latest data), with €1,660 acting as a key support level.
• Higher Highs and Higher Lows: The stock is forming a pattern of higher highs and higher lows, supported by bullish alignment of the 20, 50, 100, and 200 EMAs (all trending upward). Volume spikes during upward moves confirm the trend’s strength.
• Prediction: Based on previous price waves, I expect a quick move toward €2,000 within the next two weeks, representing a potential 16% gain from the current €1,718.5.

This technical setup suggests that the stock is gearing up for another leg higher.

Analyst Opinions

Analysts are overwhelmingly bullish on Rheinmetall:

• Buy Ratings: Morgan Stanley, Jeffries, UBS, and many other top analysts have reiterated their buy recommendations, citing the company’s growth potential and undervaluation.
• Price Targets: Many analysts have updated their price targets, but I believe they still underestimate the stock’s potential given the industry’s growth trajectory. Many are still playing it safe and not including the new NATO guidelines in their current projections.

Additional Catalysts

Several recent developments further support the bullish case:

• Partnerships: Rheinmetall is forming strategic partnerships with major defense companies like Lockheed Martin, Leonardo, Thales, Anduril, Auterian, and many more which could lead to increased sales source.
• EU and UK Investments: The EU’s €150 billion defense fund and the UK’s investment in munitions factories are likely to generate additional orders source.
• Geopolitical Risks: The ongoing conflict in Ukraine and the lack of a peace agreement suggest sustained demand for military equipment source.

Conclusion

Honestly, too much is going on with this stock to list it all in a single post. Rheinmetall is uniquely positioned to capitalize on the rearming of Europe and increasing geopolitical tensions. The company’s strong financials, massive order book, and undervaluation make it a compelling investment. Technical analysis and analyst opinions further support the bullish outlook, with the potential for the stock to reach €2,000 in the near term and continue growing as defense spending increases. In my view, Rheinmetall is still heavily undervalued, and this is just the beginning of a long-term growth story.