Al Root

There is a new defense stock for investors to play, and it is overseas.

The Prague-based company CSG completed its initial public offering on Friday. Shares, priced at EUR25 (about $29.50), surged 31% to EUR32.69 in overseas trading.

The company, which produces ammunition, trucks, and defense electronics, raised EUR3.8 billion for growth. Recent prices value the company at about $33.5 billion, or about 40 times 2025 earnings, and perhaps 35 times 2026 earnings, based on recent growth rates.

Large U.S. defense contractors trade for closer to 24 times estimated 2026 earnings. CSG is growing faster than U.S. contractors, though. Sales in the first nine months of 2025 rose 80% year over year, while profits jumped 25%.

Large U.S. defense contractors are expected to increase earnings at a healthy 16% rate in 2026.

Growth rates and valuations in Europe have risen, however, as traditional alliances, including NATO, have frayed, with the outlook for a rise in European military spending.

Shares of Germany's Rheinmetall, Britain's BAE Systems, France's Thales, and Italy's Leonardo have climbed an average of almost 100% over the past 12 months. That leaves the group trading for about 28 times earnings expected over the coming 12 months, up from about 18 times a year ago.

Higher growth is the reason for the higher valuation. Looking ahead, those four companies are expected to grow earnings by an average of 25% in 2026.

The strong reception of CSG stock on Friday is another example of how the outlook for European defense has changed.

The outlook for American defense is solid, too. And America has its own hot defense stocks. Drone, space, and missile technology provider Karman sold shares at $22 in February. The stock was above $110 in midday trading Friday.

Its earnings are expected to grow 60% in 2026. Shares trade for a lofty 177 times earnings expected over the coming 12 months.

There are plenty of opportunities in the U.S. defense sector. Investors don't have to sell America, but they might want to consider adding some EU contractors as well.

Write to Al Root at allen.root@dowjones.com

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January 23, 2026 12:26 ET (17:26 GMT)

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