Forget Lockheed Martin. This Defense Stock Will Double by 2028.

Lockheed Martin (NYSE:LMT | LMT Price Prediction) dominates financial media, riding a record backlog and climbing stock price. Every defense analyst touts it.

Lockheed’s story is real, but it’s priced in. The stock has climbed 24.21% over the past year and trades at a trailing P/E of roughly 26x on full-year 2025 EPS of $21.49. For a defense contractor expected to grow revenue at 5% annually in the coming years, that is not a bargain. Net income actually declined 5.98% for the full year despite revenue growth. The company carries $21.7 billion in debt against only $4.1 billion in cash. Lockheed simply isn’t growing fast enough for all the hype. And while you will see lots of demand and a ballooning backlog, the company isn’t making the best use of it. There hasn’t been any aggressive ramp-up in revenue and there’s no expectation for double-digit growth anytime soon.

It’s time to look elsewhere.

Rheinmetall (OTC:RNMBY) sits quietly in the OTC market, largely ignored. It’s up just 1.84% over the past year and down 7.91% year to date. For a company that returned 1,661% over five years, this pause typically precedes another leg up.

The Demand Is Structural, Not Cyclical

At the 2025 NATO Summit in The Hague, allies committed to raising defense investment to 5% of GDP annually by 2035, up from the old 2% target most members were already struggling to meet. That is a decade-long procurement mandate. Rheinmetall, as Germany’s premier land systems and ammunition manufacturer, sits directly in that spending wave. European defense expenditure reached an estimated 2.1% of EU member states’ GDP in 2025, up from 1.6% in 2023. The runway to 5% is long and orders are flowing.

Europe is seeking significantly more autonomy, especially as the U.S. is showing signs that it might wind down support for Ukraine against Russia, leaving that up to Europe. For Europe to arm Ukraine by itself, it needs to massively invest in its manufacturing, which it has been doing so since 2022 and making good progress. And furthermore, Europe is also going beyond just rearming Ukraine and rearming itself to make sure other countries in Eastern Europe can be defended without tentative support from the U.S.

The Numbers Confirm the Thesis

Rheinmetall reported full-year 2025 revenue of 9.94 billion euros, up 29% year over year, with an operating result of 1.84 billion euros, up 33%. The order backlog reached a record 63.8 billion euros, a 36% jump from the prior year. For 2026, the company guided for sales of 14 billion to 14.5 billion euros, representing growth of 40% to 45%, with an operating margin target of approximately 19%. The company expects its order backlog to more than double to 135 billion euros by year end. Lockheed’s record backlog of $194 billion gets celebrated in every earnings recap. Rheinmetall’s backlog is growing faster from a smaller base, with a cleaner balance sheet and no fixed-price contract exposure on classified programs.

The Stock Has Not Caught Up to the Business

A stock that barely moved in a year while the underlying business grows revenue at 29% to 45% annually has a gap to close. The U.S. government sector’s contribution to GDP growth has decelerated to just 0.4% in Q4 2025, down from 1.3% in Q4 2024. American defense manufacturing growth nearly stalled at 0.3% in Q4 2025 and actually contracted 2.6% in Q1 2025. The growth engine in global defense is shifting toward European rearmament. Lockheed is a fine business growing at a slower pace, with valuation reflecting U.S.-centric defense exposure as the growth engine shifts toward European rearmament.

Rheinmetall CEO Armin Papperger said in March: “The world is changing rapidly, and Rheinmetall is well prepared.” It describes a company whose order book is compounding faster than its stock price. That gap closes eventually.

Rheinmetall’s order book is compounding faster than its stock price, and that gap tends to close.