AeroVironment has gotten torched over the last six months - since January 2026, its stock price has dropped 45.5% to $147.13 per share. This might have investors contemplating their next move.
Is there a buying opportunity in AeroVironment, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is AeroVironment Not Exciting?
Even though the stock has become cheaper, we’re passing on AeroVironment for now. Here are three reasons we avoid AVAV, plus one stock we’d rather own.
1. Shrinking Operating Margin
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses — everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Looking at the trend in its profitability, AeroVironment’s operating margin decreased by 13.5 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. AeroVironment’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers. Its operating margin for the trailing 12 months was negative 15.7%.
2. Cash Burn Ignites Concerns
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
While AeroVironment posted positive free cash flow this quarter, the broader story hasn’t been so clean. AeroVironment’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 4.6%, meaning it lit $4.63 of cash on fire for every $100 in revenue.
3. Previous Growth Initiatives Have Lost Money
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
AeroVironment’s five-year average ROIC was negative 3.7%, meaning management lost money while trying to expand the business. Its returns were among the worst in the industrials sector.
Final Judgment
AeroVironment isn’t a terrible business, but it isn’t one of our picks. After the recent drawdown, the stock trades at 43.8× forward P/E (or $147.13 per share). This multiple tells us a lot of good news is priced in - we think other companies feature superior fundamentals at the moment. We’d suggest looking at a top digital advertising platform riding the creator economy.
Stocks We Would Buy Instead of AeroVironment
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
