Attention, defense investors!

In case you haven't heard, there's a new president in town, and he's determined to shake up the Washington, D.C. establishment, cut red tape, and reduce spending. Investors in defense stocks seem a bit nervous at the prospect, and defense stocks have been generally down over the past three months.

Most defense stocks, that is.

Since mid-October, when I first warned investors that stocks catering to the Department of Defense were starting to look expensive, one defense stock in particular has actually doubled in price, and there may be a reason for that. Palantir Technologies (PLTR 1.56%) is part of a new wave of companies breaking new boundaries in high-technology defense. Palantir's specific angle on this is a focus on artificial intelligence (AI). Since its initial public offering (IPO) back in 2020, Palantir shares are up eightfold.

Today, I want to introduce you to another defense company -- currently privately held -- that just might be the next Palantir.

Introducing Anduril

Much like Palantir, Anduril describes itself as a defense technology company. Anduril has developed a Lattice AI software platform that can translate thousands of data streams simultaneously into "a realtime, 3D command and control center" for the military. Focusing specifically on drone technology, the company also produces autonomous Roadrunner unmanned aerial vehicles (i.e., drones), Dive-LD underwater drones, anti-drone "counter-UAS" guns, and autonomous surveillance systems as well.

The company also produces solid rocket motors for both offensive and defensive missiles.

Why should you care about Anduril?

Well and good. But why should investors care about Anduril if it's currently a private company? Well, simply put, because Anduril might IPO soon.

Since its establishment in 2017 (by, among others, Oculus founder Palmer Luckey and several Palantir alums), Anduril has raised in excess of $3.8 billion in capital from investors, nearly half of which came in a capital raise last August. The company currently boasts an estimated private market valuation of $25 billion -- less than a tenth of Palantir's market cap but moving in the right direction.

With so much money already, and such a high market cap, you might think Anduril would be in no rush to IPO. However, earlier this month, Luckey told Bloomberg that Anduril is in fact "on a path to being a publicly traded company" and confirmed that he considers an IPO "important" for the company.

Should you want to own Anduril when it goes public?

As a private company, Anduril is not obligated to disclose any of its financial information publicly. That said, from various sources, S&P Global Market Intelligence has ascertained that Anduril generated about $457 million in revenue in 2023. In his Bloomberg interview, Luckey played coy but did admit that "the rumor" is that Anduril doubled its revenue to "about a billion."

No word yet on whether those revenues are profitable for Anduril, but even if the company is not yet profitable, just the revenue growth rate alone -- 100% -- suggests this is a high growth company worth keeping an eye on should it announce an initial public offering.

That's not to say, however, that when and if Anduril does IPO, you should rush right out and buy it. In fact, assuming private market estimations of the company's $25 billion valuation are correct, and assuming the rumored $1 billion in 2024 revenue is also correct, we're looking here at a very richly priced defense stock, selling for 25 times trailing sales. That's more than the 1.7 times sales that the average defense stock costs today and way more than the 1.4 times sales defense stocks have averaged over the last 20 years.

Granted, I'd argue Anduril looks not nearly as overvalued as a stock like Palantir, which costs more than 71 times trailing sales presently (and 395 times earnings, too). Perhaps the best scenario investors can hope for, therefore, is that stock valuations shrink quite a bit between now and whenever Anduril IPOs.

That could give you a chance to buy Anduril for a lot less...and maybe a chance to buy Palantir cheaper as well.