Elbit Systems Ltd.

ESLT Investment Analysis

Technical Analysis: ESLT shows strong momentum despite consolidation near its all-time high. Its negative beta indicates unusual independence from market trends, though entering at current levels offers limited discount from recent peaks. The stock appears to be pausing after a significant rally, suggesting patience may be prudent.

Fundamentals: The company maintains solid profitability and conservative leverage, though operational efficiency shows some strain with extended cash conversion cycles. Revenue moderation in the latest quarter is balanced by improving net margins and adequate cash flow coverage of obligations.

Valuation: Current multiples appear stretched, with exceptionally high PE and EV/EBITDA ratios suggesting substantial growth expectations are already priced in. The elevated PEG ratio indicates valuation may not be supported by near-term earnings growth potential.

Risk: The negative beta introduces unconventional portfolio dynamics, while minimal short interest reduces squeeze risk but may reflect lower market engagement. Working capital inefficiencies represent an operational watch point.

Investment Recommendation:

ESLT demonstrates strong operational foundations but trades at premium valuations that appear demanding. While the company's counter-cyclical characteristics and profitability are attractive, current prices likely incorporate much of the positive outlook. Investors might consider waiting for a more attractive entry point or a clear catalyst that justifies the elevated multiples. The stock appears better suited for watchlists than immediate purchase at current levels.

RockFlow Model Forecast: Three Scenarios for 2026

Based on the provided analysis, here is a 12-month outlook for ESLT:

The primary catalyst for ESLT over the next year is its strong operational foundation and unique counter-cyclical characteristic, as indicated by its negative beta, which could provide defensive stability if broader market conditions weaken. However, significant risks are present, primarily stemming from its exceptionally stretched valuation and already high growth expectations, which leave little room for disappointment and make the stock vulnerable to a downturn if operational efficiencies do not materially improve. With no clear analyst target price available and the stock consolidating near all-time highs, a prudent 12-month target range is difficult to establish; investors should await a more attractive entry point or a fundamental catalyst that justifies the current premium multiples before considering a position.

Wall Street Consensus

Most Wall Street analysts are optimistic about Elbit Systems Ltd.'s 12-month outlook, with consensus target around $730.31, indicating expected upside potential.

Overall, ESLT has investment potential but also faces challenges. Here are key factors to weigh before investing.

ESLT demonstrates exceptional long-term momentum despite recent volatility, with the stock delivering dramatic outperformance versus the market over the past quarter. Over the short term, the stock has retreated slightly in the past month after a massive 45.32% surge over three months, significantly outperforming the broader market by over 45 percentage points during that period.

Currently trading at $702.07, ESLT is positioned near the upper end of its 52-week range, approximately 5.2% below its all-time high of $740.67. The stock appears to be consolidating after its recent parabolic advance, with its negative beta suggesting it behaves counter to broader market trends. Given its proximity to the 52-week high, the stock is not in an oversold condition.

Revenue & Profitability ESLT's Q3 2025 revenue of $1.95 billion shows a sequential moderation from Q2's $2.09 billion. The company maintains solid profitability with a gross profit margin of 24.9% and an improving net income margin of 6.94% versus 6.37% in the prior quarter, indicating better cost control despite the revenue dip.

Financial Health The company demonstrates conservative leverage with a low debt-to-equity ratio of 0.27 and a strong interest coverage of nearly 5x. However, the cash ratio is minimal at 0.025, suggesting limited liquid assets, though operating cash flow per share of $3.39 provides adequate coverage for ongoing obligations.

Operational Efficiency ESLT's operational efficiency shows mixed signals with a respectable return on equity of 3.38% but relatively low asset turnover of 0.16. The extended cash conversion cycle of 242 days, driven by high days sales outstanding (145) and inventory days (193), indicates potential working capital management challenges affecting capital efficiency.

Valuation Level ESLT appears substantially overvalued based on its current valuation metrics. The TTM PE ratio of 71.23 and forward PE of 43.33 are exceptionally high, indicating investors are paying a significant premium for its earnings. This is further underscored by the elevated EV/EBITDA of 111.06 and a PEG ratio of 7.47, which suggests the high valuation is not justified by its expected earnings growth rate.

Peer Comparison A peer comparison cannot be conclusively performed as industry average data is unavailable. However, the extremely high PE, EV/EBITDA, and PEG ratios are typically indicative of a valuation that is significantly above average for most mature industries. Without specific benchmarks, the analysis relies on the premise that such multiples are unsustainable outside of exceptionally high-growth sectors.

Volatility Risk ESLT exhibits unusual volatility characteristics with a negative beta of -0.217, implying the stock historically moves inversely to the broader market. This can introduce unique portfolio risks, as the stock may not provide expected diversification during market downturns. The 1-year maximum drawdown of -13.56% is relatively moderate for an equity, suggesting contained historical downside volatility.

Other Risks A notable feature is the apparent absence of short interest, which reduces the risk of a short squeeze but may also indicate low market scrutiny or speculative activity. While eliminating one source of price pressure, this could point to potential liquidity concerns or subdued investor interest, which may impact trading efficiency.