Could Europe become the next big market for EOS?

Electro Optic Systems Holdings Ltd (ASX: EOS) shares have been among the ASX's best performers over the past few years.

Much of the interest has come from the company's growing order book and its push into high-energy laser weapons.

But another part of the EOS story is starting to catch my interest.

Europe.

The region is spending huge amounts of money rebuilding its defence capabilities, and EOS has been quietly putting itself in a better position to benefit.

So, could Europe become the company's next major growth market?

Let's take a closer look.

Europe is spending big on defence

There's certainly no shortage of money being thrown at defence across Europe right now.

Last year, European NATO members and Canada increased defence spending by nearly 20%, or more than US$139 billion.

And that looks set to continue.

NATO members have committed to spending 5% of GDP on defence and security-related investment by 2035.

This includes at least 3.5% of GDP on core defence requirements.

Already, European members and Canada are spending close to 4% of GDP on defence and security.

There is plenty happening at the European Union level as well.

Its Readiness 2030 plan aims to mobilise up to 800 billion euros in additional defence spending.

This includes 150 billion euros to support joint procurement between member states.

Drones are also high on the shopping list.

The European Commission has launched a European Drone Defence Initiative to help strengthen the region's defence capabilities by 2030.

EOS is building its European presence

One of the biggest changes came through EOS' acquisition of MARSS earlier this year.

EOS completed its acquisition of the European defence technology company in May for around $134 million.

MARSS is behind NiDAR, a command-and-control platform designed to detect, track, and respond to threats such as drones.

The company has since relocated MARSS' headquarters to Nice, France, giving EOS a bigger base in the region.

EOS also plans to expand its European operations from the site over the next three years.

And there are already signs that NiDAR is gaining traction.

BAE Systems selected the platform last year as the command-and-control system for its Battlespace Integrated Targeting System.

Could Europe drive the next leg of growth?

I think Europe could become a much bigger market for EOS over the next few years.

The company now has a bigger footprint in the region at a time when defence spending is climbing quickly.

Drones are also becoming a much bigger focus, which plays nicely into what EOS is already doing.

And with billions of dollars set to be spent on defence across Europe, there should be plenty of opportunities ahead.

The post Could Europe become the next big market for EOS? appeared first on The Motley Fool Australia.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Electro Optic Systems. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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