
Best Defense Stocks for 2022: Defense Investing 101 | The Motley Fool
As the U.S. continues to fortify its defense budget, you may wish to invest in the defense industry's most promising stocks. Here's what the landscape looks…
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" Pay attention to these metrics when evaluating defense stocks:
- Free cash flow: This is important for any business, but free cash flow can vary for defense contractors based on whether their projects are new or well established. Companies often spend more in the early stages of a production contract, temporarily depressing cash flow.
- Corporate backlogs: Investors should pay close attention to corporate backlogs, which are future contracts that have been awarded but not yet executed. How much of a backlog has been funded and how much of it must go through the congressional budgeting process can vary greatly.
- Book-to-bill ratio: This metric compares the value of orders received in a given quarter with the amount billed and indicates a company's growth potential. A growing company should have a book-to-bill ratio of at least 1.0, implying that orders for future products are being booked at a rate that equals or exceeds what is being shipped today. "
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