We recently published a list of 10 Defense Stocks with the Highest EPS Growth in 5 Years. In this article, we will take a look at where Innovative Solutions and Support, Inc. (NASDAQ:ISSC) stands against other stocks with the highest EPS growth during this period.
The world has been embroiled in deadly political and armed conflict over the last few years. Russia’s war on Ukraine has gone beyond three years, while the Middle East is up in flames after Israel launched a full-scale invasion of Gaza against Hamas. According to a report, the number of conflict zones worldwide has increased by nearly two-thirds since 2021.
While the human impact of these wars has been tragic, the defense industry has profited by luring investors into buying up stocks. Several of the world’s top contractors saw their shares book all-time highs last year.
A recent report by the International Institute for Strategic Studies (IISS) stated that global defense spending soared to a record high of $2.46 trillion in 2024, amid significant budget increases in Asia, Europe, the Middle East, and North Africa due to deteriorating security environments and threat perceptions. Easing inflation in different parts of the world also allowed countries to invest in and bolster national defense.
Global defense stocks have surged this year as European capitals unlock billions to supercharge their militaries. Several contractors in the region are registering double-digit returns. Asian defense manufacturers, especially in South Korea and India, have also benefited from the splurge.
In contrast, American defense stocks have been subdued this year and missed the global rally due to concerns around government budget cuts and reduced military spending in the future if things settle down with Russia and China. The creation of DOGE has also reshaped investors’ views of the industry.
Despite a shaky start to 2025, most analysts remain optimistic about the sector, with the downside shrinking. They believe that while the world may be heading toward a multi-polar order, it is no less dangerous to decrease the need for deterrence tools.
Investor sentiment has received a boost from two recent events. In March, President Trump unveiled a new next-generation fighter jet, the F-47, to replace the F-22 Raptor. Given the strategic competition with China, he has also announced to resurrect America’s military and commercial shipbuilding industry, which he sees as vital to national security.
With that said, let’s now shift focus on the defense stocks with the highest EPS growth in 5 years.
Is Innovative Solutions and Support, Inc. (ISSC) Among Defense Stocks with the Highest EPS Growth in 5 Years?
An engineer in a meeting room, strategizing the future of the company's utility management system.
Methodology
For this article, we went through screeners to identify stocks in the aerospace and defense industry that have had positive EPS growth over the last five years. From there, we picked the top 10 defense stocks with the highest EPS growth during this period. Pure-play aerospace companies that do not deal in defense contracts are not part of the list. All data is as of the close of business on Thursday, April 3, 2025.
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Innovative Solutions and Support, Inc. (NASDAQ:ISSC)
EPS Growth, Past 5 Years: 29.67%
Innovative Solutions and Support, Inc. (NASDAQ:ISSC) manufactures and sells advanced avionic solutions to a broad customer base, spanning commercial, military, and business and aviation markets.
Last month, the company unveiled the next-generation Prodigy 3ATI Integrated Standby Unit (ISU) to enhance flight safety, efficiency, and reliability. The unit has set a new standard in aviation instrumentation by consolidating important flight data into a compact display system. The Prodigy 3ATI ISU is available for use on commercial, military, and business aviation applications.
Innovative Solutions and Support, Inc. (NASDAQ:ISSC)’s shares have fallen 33% year-to-date, with a major slump following the earnings call for the first quarter of fiscal year 2025 on January 29. The company reported net revenues of $16 million, representing a 70% year-over-year growth, driven by momentum from new military programs.
However, gross margins dropped from 59.3% last year to 41.4% due to incremental depreciation from recent product line acquisitions. Net income for the first quarter was recorded at $0.7 million or $0.04 a share, missing estimates and down from $1.1 million, or $0.06 per share a year ago.
Despite the crash, experts argue that Innovative Solutions and Support, Inc. (NASDAQ:ISSC) offers a strong risk-reward profile, and the share price could return to the $11-12 range when the market reassesses the company’s earnings power. It has spent a long time shifting toward OEM sales, stabilizing the business. Moreover, the acquisition of Honeywell’s military product is improving revenue predictability.
Overall, ISSC ranks 6th among the 10 Defense Stocks with the Highest EPS Growth in 5 Years. While we acknowledge the potential of defense companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than ISSC but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
