One-glance verdict
Overvalued
$23.94 our estimate vs market $77.54
Wall Street consensus: $109.00 (355.4% higher than our fair-value estimate)
224% above our estimate, beyond the bull case
Fundamentals snapshot
Mercury Systems, Inc.
MRCY · NMS · Industrials · Aerospace & Defense
Current price
$77.54
52-week range
$65.04 - $128.45
Market cap
$4.72B
Balance sheet
Distressed
0.25x Concerning
Net debt $288.58M. Interest coverage shows how many times profit covers the interest bill.
What stands out
2 Rewards
2 Risks
2 rewards · 2 risks
- Reward Revenue grew 7.9% last year.
- Reward Free cash flow was positive in 8/10 years.
- Risk Insider ownership is only 1.2% (peer median: 4.4%).
- Risk Return on equity was -2.0% last year — the company lost money on shareholders' equity.
What this company does
Mercury Systems, Inc.
Mercury Systems makes and sells electronic parts and systems for defense and aerospace companies. Their money mostly comes from selling these specialized components and larger systems, which is important because it means they are a key supplier in a crucial industry.
How the company got here
Mercury Systems was founded in 1981, initially focusing on high-performance computing before evolving into the aerospace and defense electronics industry. Over the years, the company has grown significantly, partly through strategic acquisitions of other technology firms. This expansion has allowed Mercury to build a broad portfolio of specialized electronic components and subsystems. Headquartered in Andover, Massachusetts, Mercury Systems has established itself as a key supplier to major defense contractors and government agencies, providing critical technology for advanced defense platforms. The company's journey reflects a strategic shift towards becoming an independent merchant supplier of specialized electronics, rather than a developer of complete weapon systems.
What it actually does
Mercury Systems designs, builds, and sells advanced electronic components and subsystems that are essential for the operation of sophisticated aerospace and defense equipment. Think of them as the high-tech 'brains' and 'nervous systems' inside advanced military aircraft, radar systems, and other defense technology. Their products are not the planes or missiles themselves, but the critical internal electronics that enable these systems to perform complex tasks like processing data, detecting targets, and communicating securely. These components need to be extremely reliable and capable of operating in harsh environments, which is Mercury's specialty.
Processing Solutions
This part of Mercury Systems focuses on the 'brains' of defense systems, creating powerful and rugged computing modules and subsystems. These are essentially specialized computers designed to handle massive amounts of data very quickly, even in challenging conditions like those experienced in military aircraft or ground vehicles. Customers, primarily defense contractors and government agencies, use these solutions for tasks such as real-time data analysis, signal processing, and running complex software applications critical for mission success. This segment represents a significant portion of Mercury's business, providing the core computational power for many defense platforms.
RF and Microwave Solutions
This business line deals with the 'ears' and 'voices' of defense systems, focusing on radio frequency (RF) and microwave components. These are the parts that handle signals, like those used in radar, electronic warfare (detecting and jamming enemy signals), and secure communications. Mercury designs and manufactures specialized components such as amplifiers, filters, and integrated assemblies that are crucial for the performance of these systems. This segment is vital for enabling defense platforms to 'see' their environment, communicate effectively, and counter threats, forming a key revenue stream for the company.
Secure Mission Systems
This segment is dedicated to providing integrated subsystems and solutions that are hardened for security and reliability in critical defense missions. It encompasses a range of products, including digital radio frequency memory units for electronic warfare, radar environment simulation and test systems, and specialized processing systems for intelligence gathering and unmanned aerial vehicles (UAVs). These systems are designed to operate in highly sensitive applications where data integrity and system security are paramount, serving a crucial role in intelligence, surveillance, and reconnaissance operations for government and defense clients.
Custom Microelectronics
This area involves the design and manufacturing of highly specialized microelectronic components, often tailored to very specific customer needs. This can include advanced integrated circuits, multi-chip modules, and secure memory solutions. These custom-built components are essential for defense applications where standard, off-the-shelf parts may not meet the stringent performance, security, or environmental requirements. This segment, while potentially smaller in revenue compared to others, is critical for providing unique, high-value solutions that give defense systems a competitive edge.
What management is betting on now
Mercury Systems' management is focused on capitalizing on the ongoing modernization of defense systems, particularly the shift towards open architectures and increased digitization. They are prioritizing improvements in operational execution, manufacturing efficiency, and profitability to ensure the company can deliver these advanced technologies reliably and cost-effectively. A key strategy involves leveraging their expertise in secure, high-performance electronics to become an indispensable partner for defense prime contractors and government agencies. By focusing on innovation and reliable delivery, Mercury aims to capture growth in a market demanding increasingly sophisticated and secure electronic solutions.
Price history
How the share price has moved
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Loading price history…
Earnings history
Last 8 quarters — what happened
Click any quarter to read the call summary and what the numbers say.
FY2025 Q1
$-20.90M
FY2025 Q2
$81.91M
FY2025 Q3
$24.06M
FY2025 Q4
$33.98M
FY2026 Q1
$-4.37M
FY2026 Q2
$45.71M
FY2026 Q3
$-1.82M
FY2026 Q4
$28.57M
Revenue
$289.78M
Net income
$798.00K
Diluted EPS
0.01
Operating cash flow
$42.15M
Free cash flow
$28.57M
Fetching…
Sources
Revenue
$235.76M
Net income
$-2.86M
Diluted EPS
-0.04
Operating cash flow
$6.44M
Free cash flow
$-1.82M
Fetching…
Sources
Revenue
$232.87M
Net income
$-15.10M
Diluted EPS
-0.26
Operating cash flow
$51.61M
Free cash flow
$45.71M
Fetching…
Sources
Revenue
$225.21M
Net income
$-12.52M
Diluted EPS
-0.21
Operating cash flow
$2.18M
Free cash flow
$-4.37M
Fetching…
Sources
Revenue
$273.11M
Net income
$16.37M
Diluted EPS
0.28
Operating cash flow
$38.08M
Free cash flow
$33.98M
Fetching…
Sources
Revenue
$211.36M
Net income
$-19.17M
Diluted EPS
-0.33
Operating cash flow
$29.97M
Free cash flow
$24.06M
Fetching…
Sources
Revenue
$223.12M
Net income
$-17.58M
Diluted EPS
-0.30
Operating cash flow
$85.46M
Free cash flow
$81.91M
Fetching…
Sources
Revenue
$204.43M
Net income
$-17.52M
Diluted EPS
-0.30
Operating cash flow
$-14.66M
Free cash flow
$-20.90M
Fetching…
Sources
Is it cheap or expensive?
Fair value $23.94 vs current price $77.54
Wall Street consensus is the average analyst price target: $109.00 (355.4% higher than our fair-value estimate).
Our most-likely fair value is $23.94 a share — about 69.1% below today's price of $77.54, so the stock currently looks expensive (overvalued).
Is it drowning in debt?
Distressed
Net debt $288.6M. Interest coverage 0.3x.
Net debt
$288.58M
Interest coverage
0.25x
Mercury Systems, Inc.'s profit covers its interest bill about 0.3 times over. which is weaker than most peers shown here.
Distressed
Worse cushion
Baseline
Better cushion
MRCY
BASELINE
Mercury Systems, Inc.
Total debt $502.88M Interest coverage 0.25x This is the baseline the peer rows are being compared against.
Total debt $193.60M Interest coverage 2.89x +1,039% vs MRCY Carries about 11.4x more debt cushion than MRCY.
Total debt $1.15B Interest coverage 14.79x +5,739% vs MRCY Carries about 58.4x more debt cushion than MRCY.
Total debt $2.54B Interest coverage 7.85x +2,998% vs MRCY Carries about 31.0x more debt cushion than MRCY.
Total debt $1.05B Interest coverage 8.98x +3,447% vs MRCY Carries about 35.5x more debt cushion than MRCY.
Total debt $334.79M Interest coverage 5.82x +2,199% vs MRCY Carries about 23.0x more debt cushion than MRCY.
What you should know
The case for and against MRCY
2 Rewards
2 Risks
Rewards
-
Revenue grew 7.9% last year.
-
Free cash flow was positive in 8/10 years.
Risks
-
Insider ownership is only 1.2% (peer median: 4.4%).
-
Return on equity was -2.0% last year — the company lost money on shareholders' equity.
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)
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Forward P/E
34.77x
P/B
3.09x
P/S
4.80x
EV/EBITDA
61.76x
PEG ratio
1.03x
Profitability
How much profit each dollar creates
Gross margin
28.6%
Operating margin
1.2%
Net margin
-3.0%
ROE
-2.0%
ROA
0.2%
Health
Liquidity and balance-sheet strength
Debt / equity
0.34x
Current ratio
2.96x
Quick ratio
1.73x
Total debt
$502.88M
Total cash
$214.31M
Growth
How the business has been compounding
Revenue TTM
$983.62M
Revenue 5Y CAGR
-0.1%
EPS TTM
-0.50
EPS 5Y CAGR
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Cash flow
How much cash the business throws off
Operating CF TTM
$102.39M
Free CF TTM
$68.09M
FCF margin
6.9%
Dividend
Shareholder payout
Yield
0.0%
Payout ratio
0.0%
Last ex-div date
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