AVAV Underperforms Industry in the Past 6 Months: What Should You Do?

AeroVironment, Inc. AVAV stock has lost 30.6% in the past six months, underperforming both the Zacks Aerospace-Defense Equipment industry’s decline of 12.1% and the broader Zacks Aerospace sector’s decline of 13.5%. It also came below the Zacks S&P 500 Composite’s return of 13.9% in the same time frame.

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Other industry players, such as AAR Corp. AIR and Astronics Corporation ATRO, have delivered a stellar performance in the past six months. Shares of AIR and ATRO have risen 19.9% and 29.9%, respectively, in the said period.

With AVAV’s shares declining over the past six months, investors may have mixed views. Some may remain cautious, while others may see the decline as an opportunity. Before deciding whether to buy, hold or sell, it is important to review whether the company’s fundamentals support long-term growth or if near-term challenges are likely to persist. Evaluating AVAV’s growth prospects and risks can help in making a well-informed investment decision.

Risks to Consider Before Choosing AVAV

AeroVironment continues to operate amid several industry-specific challenges that could affect execution and financial performance. Ongoing labor shortages may constrain workforce availability across manufacturing and engineering functions, potentially limiting production capacity. This could create bottlenecks in fulfilling defense contracts, increase overtime and training expenses, and raise the risk of delivery delays, particularly as demand for unmanned systems remains strong.

Supply-chain disruptions are another key headwind. Challenges in sourcing specialized components and electronics may result in longer lead times and higher procurement costs, putting pressure on margins and complicating production planning. These constraints could also limit the company’s ability to scale production efficiently. Similar issues are affecting peers such as AAR and Astronics, suggesting that labor and supply-chain constraints are broader industry challenges rather than company-specific issues.

Tailwinds for AVAV

AeroVironment continues to expand its defense business while delivering year-over-year growth. In September 2026, the company reported fiscal 2027 first-quarter results, with revenues rising 6% year over year to $480.5 million, driven by higher product sales and service revenues. Earnings per share increased to 59 cents from 32 cents in the prior-year quarter.

In September, AVAV also secured its first international purchase order for the LOCUST Laser Weapon System. Valued at more than $50 million, the direct commercial sale includes LOCUST systems and related support. It marks a significant step in the global adoption of the company’s directed-energy counter-drone technology. The order follows the U.S. Army’s recent selection of LOCUST for a $464.8 million Enduring-High Energy Laser contract, further strengthening AVAV’s position in the growing counter-UAS market.

Estimates for AVAV’s Sales & Earnings

The Zacks Consensus Estimate for AVAV’s fiscal 2027 sales implies year-over-year growth of 9.8%, while estimates for fiscal 2028 sales indicate an improvement of 15.8%.

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The consensus estimate for AVAV’s fiscal 2027 earnings implies a year-over-year decline of 3.3%, while estimates for fiscal 2028 earnings indicate an improvement of 29.1%.

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Valuation

In terms of valuation, AVAV’s forward 12-month price-to-earnings (P/E) is 41.47X, a premium to the industry average of 33.59X. This suggests that investors will be paying a higher price relative to the company's expected earnings growth compared with its industry average.

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ROE: AVAV vs. Sub-Industry

AVAV’s return on equity stands at 4.04%, below the industry level of 15.35%. This indicates that the company is less effective than its peers at generating profits from shareholders’ equity.

Liquidity Position of AVAV

AVAV has a current ratio of 4.26. The ratio, being more than one, indicates that AVAV possesses sufficient capital to pay its short-term debt obligations.

Its industry peers, AAR and Astronics, also maintain current ratios above one. AIR has a current ratio of 2.84, while ATRO holds 2.97.

Wrapping Up

Despite AeroVironment’s long-term growth initiatives and solid liquidity position, its near-term fundamentals remain relatively weak. The stock has lagged the broader industry in recent months, while several peers have posted stronger gains.

AVAV trades at a premium valuation to the industry and its return on equity remains well below the sub-industry average. With key operational risks still present, investors may want to avoid AeroVironment stock at current levels.

AVAV currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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