Defence stocks are increasingly being recognised as a crucial component of a diversified portfolio. Today, defence businesses are providing vital technology designed to secure nations against rapidly evolving global threats, and this is reflected in their earnings and share prices.
Looking for some top defence stocks to add to a Stocks and Shares ISA or SIPP? Here are six names to check out.
BAE Systems
When it comes to UK defence stocks, it’s hard to ignore BAE Systems (BAE:LON). It’s the largest pure-play defence business on the London Stock Exchange.
Operating in over 40 countries, it manufactures a range of defence products including aircraft, ships, submarines, combat vehicles, weaponry systems, and munitions. It also has a fast-growing cybersecurity and intelligence business.
With governments spending more on defence, BAE Systems’ earnings are rising at a healthy rate. This year, the company is targeting earnings growth of 9-11%.
Looking ahead, the company has said that it expects a ‘new era’ of defence spending to drive growth for years to come. Note that at the end of 2025, it had a backlog of around £84 billion.
Zooming in on the valuation, it looks reasonable. Taking the 2027 earnings forecast of 94.7p per share, the price-to-earnings (P/E) ratio is under 20.
The dividend yield is a little over 2%. So, there’s potential for both growth and income.
Babcock International
Another large-cap FTSE 100 defence stock that could be worth a look is Babcock International (BAB:LON). It manufactures naval ships and weapons handling systems and also offers exposure to secure communications, electronic warfare, and air defence systems.
Babcock’s most recent results, for the year ended 31 March, showed revenue growth of 8% and underlying earnings growth of 20%. So, the company is performing well at the moment.
At the end of March 2026, it had a backlog of £9.8 billion. That’s roughly two years’ worth of sales.
Looking at earnings forecasts for the current financial year, the stock is trading on a forward-looking P/E ratio of 16. So, it’s among the cheaper defence stocks in the market.
The dividend yield here is around only around 1.2%. However, the company is increasing its dividend payout at a rapid rate at present.
Rolls-Royce Holdings
Also in the FTSE 100, there’s Rolls-Royce Holdings (RR:LON). While it’s known for its civil aviation engines, it produces engines for a range of air combat vehicles and ships as well as nuclear propulsion solutions for submarines, so it offers significant exposure to the defence industry.
One thing that separates Rolls-Royce from other defence stocks is that the company is seeing turbo-charged profit growth as a result of a transformation programme. In 2025, group operating profit was £3.5 billion versus £2.5 billion in 2024.
Looking ahead, the company is targeting operating profit of £4.9 billion to £5.2 billion by 2028 as its transformation continues. If it can execute here, its share price – which has exploded higher over the last three years – could continue to climb.
There’s not much scope for error, however. Because the valuation is high – the P/E ratio is currently near 40.
MS International
Those looking for small-cap defence UK stocks may wish to take a look at MS International (MSI:LON). It’s a small British engineering company that operates in a few industries but is increasingly focusing heavily on defence and security.
Recently, it’s been having a lot of success on the defence front, especially in the naval space. In 2025, for example, it won a large contract with the US Navy to supply stabilised gun mounts.
As a result of this momentum in defence, MS’s revenues are climbing rapidly. Between 2020 and 2025, they nearly doubled.
A slowdown in orders is a risk. However, with the stock trading on a P/E ratio of around 17, the risk/reward proposition looks attractive.
Rheinmetall
In terms of international defence stocks, one that’s worth a look is Rheinmetall (RHM:ETR). A German company, it’s renowned for its dominance in heavy weaponry and munitions.
One line of products that it’s having success with today is the Skyranger family of air defence systems. These are mobile ground based air defence systems designed to counter drones, helicopters, and cruise missiles.
It’s also having success on the munitions front as European countries scramble to top up their ammunition stockpiles. By 2027, it’s aiming to produce 1.1 million 155mm artillery shells annually, up from 70,000 in 2022.
In recent years, this defence stock has been very expensive, however, after a pullback in 2026, it now looks attractively valued. At present, the forward-looking P/E ratio is around 25.
RTX Corp
Another international defence stock worth considering is RTX Corp (RTX:NYSE). It’s the owner of land and air defense systems specialist Raytheon.
This company is widely regarded as a global leader in the all-important area of missile defence. Here, it offers the Patriot system – a comprehensive air defence system consisting of radars, command-and-control technology, and multiple types of interceptors designed to detect, identify, and eliminate aerial threats.
Like many other defence stocks, RTX is seeing solid top- and bottom-line growth at present. This year, its revenues and earnings are expected to grow 6% and 10% respectively.
Now, this stock isn’t cheap – the P/E ratio is about 28. However, with earnings growing quickly thanks to significant spending on missile defence, it should grow into its valuation in the years ahead.
Based in London, Edward is a distinguished investment writer with an extensive client portfolio comprising a diverse array of prominent financial services firms across the globe. With over 15 years of hands-on experience in private wealth management and institutional asset management, both in the UK and Australia, he possesses a profound understanding of the finance industry.
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