I have been a long time holder of Droneshield although I did...

I have been a long time holder of Droneshield although I did make the mistake of trading in and out a few times and missed out on some of the upside.

The stock is now closing in on $1.60 which is double the price of the capital raise and I have no doubt many investors are sellng to taking profits. The daily price range has also widened with the stock dropping to a low of $1.36 yesterday before rallying back up. The risk here is you can miss out in getting back in and this happended to me on another stock in the past called Promedius (PME) so I am mindful of trading quality growth companies.

From a fundamental standpoint DRO is cashed up, revenue and earnings growth are increasing and most importantly DRO is profitable. From a P/E standpoint and based on broker targets (which sometimes are slightly lagging) many would argue that the stock is overvalued in the short term. Perhaps this is correct but it is challenging to apply standard valuation metrics to a company that in my opinion is in hyper growth mode. Using forward earnings estimates the P/E is at a more reasonable level.

Ongoing tailwinds for DRO include the stock momentum (buys significantly outnumber sells), positive sentiment (defense spending and AI thematic), gaining broker/analyst support (Presentations to brokers and increasing price targets), increase in defence spending across the developed world, global conflicts/wars, timely and informative market and investor communication and engaging with governments/NATO to name a few. For example, last week the Deputy PM visited ther headquarters in Sydney and they are currently presenting at Eurosatory in Paris. The business development/sales side is a big focus.

Furthermore, based on the current market cap and trading volume it is likely DRO will move into the ASX300 index in September which will lead to the inclusion into index funds and be on the radar for fund managers that are restricted to ASX300 companies.

While I feel there is a compelling thesis for DRO to continue driving higher (at least for the next 6 months based on the above) I am under no illusion that longer term they to grow the number and size of contracts they have on the defense side at a minimum. Some may say the stock is priced for perfection at present and if they don't deliver the price could drop heavily. I am optimistic about the future and genuinely believe DRO is poised to capitalise further and grow their profits.

In my opinion (Please do your own research) DRO remains a compelling investment and some may decide to lock in profits (which is fine and you never go broke taking profits) I will be holding my full position at least until after the stock is added to the ASX300 index in September. I will also keep the stock I picked up in the cap raise until April next year to ensure I receive the 50% tax discount for holding for a year. Please discuss CGT and tax with your Accountant.

I am interested to hear other thoughts on the outlook for the stock and value comments from those on the forum.