One-glance verdict
Overvalued
$8.93 our estimate vs market $48.37
Wall Street consensus: $102.76 (1,050.5% higher than our fair-value estimate)
442% above our estimate, beyond the bull case
Fundamentals snapshot
Kratos Defense & Security Solutions, Inc.
KTOS · NMS · Industrials · Aerospace & Defense
Current price
$48.37
52-week range
$43.09 - $134.00
Market cap
$9.08B
Balance sheet
Healthy
2.89x Stretched
Net cash $1.24B. Interest coverage shows how many times profit covers the interest bill.
What stands out
3 Rewards
2 Risks
3 rewards · 2 risks
- Reward Revenue grew 13.0% last year.
- Reward Returns 1.1% on equity, ahead of 33% of its peers.
- Risk Insider ownership is only 1.3% (peer median: 36.2%).
- Risk Operating margin compressed from 0.5% to -0.2% over 3 years.
What this company does
Kratos Defense & Security Solutions, Inc.
Kratos Defense & Security Solutions builds advanced military technology, with a focus on products like high-tech drones, rocket systems, and satellite communications equipment. The company makes most of its money selling these systems to the U.S. government and its allies for national security purposes. This means Kratos's business is closely tied to government defense budgets and the demand for next-generation military technology.
How the company got here
Kratos started in 1994 as a company called Wireless Facilities, Inc., which focused on building telecommunications networks. A major shift happened in the early 2000s when new leadership decided to pivot the company towards serving the U.S. government and Department of Defense. This new focus led to a name change in 2007 to Kratos Defense & Security Solutions. The company grew by acquiring several other firms that specialized in areas like satellite data handling and defense engineering, which built it into the diverse defense technology company it is today.
What it actually does
Kratos is a technology company that creates products and systems for the military and national security. Think of them as a high-tech workshop for the armed forces, building things like advanced drones, satellite communication systems, and rocket technologies. Their customers are primarily U.S. government agencies, including the Department of Defense, as well as allied foreign governments. Kratos focuses on developing technology that is both advanced and affordable, aiming to get new capabilities to the warfighter quickly.
Kratos Government Solutions
This is the company's largest business segment, providing a stable base of revenue (the money a company earns from sales). It offers a wide variety of technology and support services to the government, including ground systems that help control and communicate with satellites. This segment also produces microwave electronics for missile and radar systems, provides rocket support, and develops training and cybersecurity solutions. Essentially, this part of the company provides the critical infrastructure and electronic systems that support military and space operations.
Unmanned Systems
This is the high-growth part of Kratos that gets a lot of attention. This segment designs and builds unmanned aerial vehicles (UAVs), which are more commonly known as drones. They make two main types: target drones that are used for military training to simulate enemy aircraft, and tactical drones, like the well-known XQ-58A Valkyrie, which are designed for combat and surveillance missions. The focus here is on creating high-performance, yet affordable, drones that can be produced in large numbers.
What management is betting on now
Kratos's leadership is heavily focused on being a fast and affordable provider for the military, a different approach from many larger defense contractors. They are making big bets on unmanned systems, particularly affordable, 'attritable' drones (aircraft that are inexpensive enough to be lost in combat without a major financial or strategic setback). The company is also investing heavily in hypersonics (flight at extremely high speeds), rocket motors, and space-related technologies. Instead of paying out dividends (a portion of profits paid to shareholders), Kratos reinvests its earnings back into the company to fund research and development, aiming to be the first to market with new, crucial defense technologies.
Price history
How the share price has moved
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Earnings history
Last 8 quarters — what happened
Click any quarter to read the call summary and what the numbers say.
FY2024 Q3
$-9.20M
FY2024 Q4
$32.00M
FY2025 Q1
$-51.80M
FY2025 Q2
$-32.20M
FY2025 Q3
$-41.30M
FY2025 Q4
$-12.10M
FY2026 Q1
$-47.30M
FY2026 Q2
$-28.20M
Revenue
$458.80M
Net income
$4.40M
Diluted EPS
0.02
Operating cash flow
$-11.00M
Free cash flow
$-28.20M
Fetching…
Sources
Revenue
$371.00M
Net income
$11.90M
Diluted EPS
0.07
Operating cash flow
$-27.40M
Free cash flow
$-47.30M
Fetching…
Sources
Revenue
$345.10M
Net income
$5.90M
Diluted EPS
0.03
Operating cash flow
$12.10M
Free cash flow
$-12.10M
Fetching…
Sources
Revenue
$347.60M
Net income
$8.70M
Diluted EPS
0.05
Operating cash flow
$-13.30M
Free cash flow
$-41.30M
Fetching…
Sources
Revenue
$351.50M
Net income
$2.90M
Diluted EPS
0.02
Operating cash flow
$-11.70M
Free cash flow
$-32.20M
Fetching…
Sources
Revenue
$302.60M
Net income
$4.50M
Diluted EPS
0.03
Operating cash flow
$-29.20M
Free cash flow
$-51.80M
Fetching…
Sources
Revenue
$283.10M
Net income
$3.90M
Diluted EPS
0.03
Operating cash flow
$45.60M
Free cash flow
$32.00M
Fetching…
Sources
Revenue
$275.90M
Net income
$3.20M
Diluted EPS
0.02
Operating cash flow
$6.10M
Free cash flow
$-9.20M
Fetching…
Sources
Is it cheap or expensive?
Fair value $8.93 vs current price $48.37
Wall Street consensus is the average analyst price target: $102.76 (1,050.5% higher than our fair-value estimate).
Our most-likely fair value is $8.93 a share — about 81.5% below today's price of $48.37, so the stock currently looks expensive (overvalued).
Is it drowning in debt?
Healthy
Net cash $1.2B - more cash than debt. Interest coverage 2.9x.
Net debt
$-1.24B
Interest coverage
2.89x
Kratos Defense & Security Solutions, Inc.'s profit covers its interest bill about 2.9 times over. which is stronger than most peers shown here and 1 peers sit below 1x, which is the danger zone where profit does not fully cover the interest bill.
Healthy
Worse cushion
Baseline
Better cushion
KTOS
BASELINE
Kratos Defense & Security Solutions, Inc.
Total debt $193.60M Interest coverage 2.89x This is the baseline the peer rows are being compared against.
Total debt $850.82M Interest coverage -12.52x -100% vs KTOS This peer has almost no interest-payment cushion compared with KTOS.
Total debt $267.00M Interest coverage 43.50x +1,408% vs KTOS Carries about 15.1x more debt cushion than KTOS.
What you should know
The case for and against KTOS
3 Rewards
2 Risks
Rewards
-
Revenue grew 13.0% last year.
-
Returns 1.1% on equity, ahead of 33% of its peers.
-
Free cash flow was positive in 3/10 years.
Risks
-
Insider ownership is only 1.3% (peer median: 36.2%).
-
Operating margin compressed from 0.5% to -0.2% over 3 years.
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
284.53x
Forward P/E
43.92x
P/B
2.65x
P/S
5.96x
EV/EBITDA
88.36x
PEG ratio
36.41x
Profitability
How much profit each dollar creates
Gross margin
23.0%
Operating margin
-0.2%
Net margin
2.0%
ROE
1.1%
ROA
0.4%
Health
Liquidity and balance-sheet strength
Debt / equity
0.06x
Current ratio
5.54x
Quick ratio
4.74x
Total debt
$193.60M
Total cash
$1.44B
Growth
How the business has been compounding
Revenue TTM
$1.52B
Revenue 5Y CAGR
13.5%
EPS TTM
0.17
EPS 5Y CAGR
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Cash flow
How much cash the business throws off
Operating CF TTM
$-39.60M
Free CF TTM
$-137.40M
FCF margin
-9.0%
Dividend
Shareholder payout
Yield
—
Payout ratio
0.0%
Last ex-div date
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