It is no exaggeration to say that Electro Optic Systems Holdings Ltd (ASX: EOS) shares have been on fire this year.
Since the start of 2025, the defence and space company's shares have risen an incredible 275%.
This means that a $10,000 investment at the end of last year would now be worth $37,500.
Despite this, one leading broker believes there are still more gains to come.
Bell Potter was pleased with the company's recent half year results, highlighting that its revenue and earnings were better than expected. It said:
EOS reported -61% YoY revenue decline to $44.1m within the company's guided revenue range of $40-45m and ahead of BPe forecast of $43.9m. The decline was driven by a -62% YoY fall in Defence offset partially by +29% YoY rise in Space revenues. The gross margin came in at 75% (BPe 61%), reflecting inclusion of accumulated benefits from Middle East contract finalisation, resulting in temporarily inflated margins. Underlying EBITDA was -$13.3m (BPe -$18.6m), a fall on 1H24 of -$1.0m. NPAT fell to -$44.8m from 1H24 -$10.8m and was lower than our estimate (-$39.6m) due to higher-than-expected D&A and a $5.8m FX loss.
But given recent contract wins and its sales pipeline, its full year results could look very different. Bell Potter adds:
Outlook: Contract backlog was $307m as at 22 August 2025. Notably, EOS mentions that initial discussions have occurred for "more than 1 HELW 100kW+ opportunity, each >$500m".
In light of the above, the broker continues to see value in Electro Optic Systems shares.
According to the note, the broker has retained its buy rating with an improved price target of $5.70 (from $5.00).
Based on its current share price of $4.92, this implies potential upside of approximately 16% over the next 12 months.
Bell Potter believes that the company's half year results signify its successful turnaround and that it is onwards and upwards from here. It concludes:
With debt paid down and contract assets unwound, today's result represents the conclusion of EOS's turnaround story. The company is now positioned as a market leader in counter-UAS solutions and is fully leveraged to increases in defence budgets globally magnified by higher spending allocations to counter-drone technology.
The revelation of "more than one" potential HELW customer seeking orders >10 systems supports our positive long-term view of the company. We continue to anticipate material contract awards in 2H25e, including the Land400 program, and see upside to our revenue forecasts if further HELW contracts are announced in CY26e.
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