If you are looking for outsized returns and have a higher than average risk tolerance, then it could be worth looking at the ASX stock in this article.
That's because the team at Bell Potter believes it could deliver a return that is materially better than the market average.
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Which ASX stock?
The stock that Bell Potter is recommending to clients is Electro Optic Systems Holdings Ltd (ASX: EOS).
It is an Australian defence manufacturer specialising in advanced weapon systems and satellite tracking technology.
Bell Potter notes that the company has secured its largest ever contract after entering into an agreement with the government of a Middle Eastern Gulf state. It commented:
EOS has entered into an agreement with the government of a Middle Eastern Gulf state (GCC member) for a nation-wide counterdrone (C-UAS) defence system valued at £370m (~$700m). This represents the largest contract ever secured by EOS. EOS is acting as prime contractor and systems integrator, deploying a cellular nation-wide system with MARSS' AI-enabled NIDAR C2 platform at its core. The scope includes third-party sensors (electro-optical, radar, sonar) to feed data into central command centres, as well as initial third-party effectors (hard-kill kinetic interceptors and soft-kill jammers).
EOS expects over 80% of contract revenue to be earned over the initial 12-24 months after the contract becomes unconditional. ~20% of total contract value relates to ongoing support over a 4-year period. Conditions include: Provision of a £37m performance bond, secured by a £40.3m cash security deposit (posted by EOS in August 2026); EOS providing a £74m bank guarantee, matched by an advance payment paid by the customer to EOS; and obtaining relevant export licences for system components within two months of receiving necessary documentation from customer.
In response to this news, Bell Potter has boosted its earnings per share estimates materially. It adds:
EPS changes: +0%/+946%/+94% over CY26/27/28e reflecting: the $700m contract; higher working capital in 1H27, higher tax rate. We have also incorporated scripbased earnout payments in CY27, totalling 19m in shares. We have unwound our inflated EV / EBITDA multiple following the contract award.
And while the deal is subject to a number of conditions, Bell Potter feels confident it will go ahead. It explains:
We are not discouraged by the export licence terms and believe it is likely EOS will proceed to implementation of the contract in early CY27e. Beyond financial benefits, this contract: (1) likely gives further battlefield experience to the NIDAR C2 solution, strengthening its competitive advantage; (2) establishes EOS as a specialist C-UAS prime contractor; and (3) enables upselling of EOS effectors.
Big potential returns
According to the note, Bell Potter has retained its buy rating on the ASX stock with an improved price target of $13.80 (from $12.60).
Based on its current share price of $10.13, this implies potential upside of 36% for investors over the next 12 months.
Bell Potter concludes:
Given the security deposit posted in August 2026, we believe this contract award was somewhat priced in by the market, however, we are surprised by the market's reaction and given upcoming catalysts, believe current levels represent an attractive entry point. Catalysts: >$300m Netherlands HELW production deal (Letter of Intent signed in September 2026); UAE HELW JV orders, >$500m additional MARSS orders, and a steady stream of Slinger product integration orders.
