One-glance verdict
Overvalued
$24.15 our estimate vs market $87.25
Wall Street consensus: $115.70 (379.1% higher than our fair-value estimate)
261% above our estimate, beyond the bull case
Fundamentals snapshot
Mercury Systems, Inc.
MRCY · NMS · Industrials · Aerospace & Defense
Current price
$87.25
52-week range
$65.04 - $128.45
Market cap
$5.25B
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 1.5% (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 high-tech electronic components, like specialized computer chips and sensors, that serve as the "brains" for advanced defense and aerospace equipment. The company makes money by selling these parts to large military contractors who build things like fighter jets and radar systems, making Mercury a key supplier in the national defense supply chain (the network of companies involved in creating and delivering a product). Because its technology is a critical part of long-term government defense programs, the company can benefit from stable, multi-year contracts.
How the company got here
Mercury Systems started in 1981 as Mercury Computer Systems, initially creating powerful computing systems for research and military uses that required very fast data processing. Over time, they shifted their focus to the specific needs of the aerospace and defense industry, providing durable electronics that can withstand harsh conditions like extreme temperatures and vibrations. A key part of their growth has been buying other companies—over 20 of them—to bring in new technologies related to things like radio frequencies and secure memory. This series of acquisitions helped them become a more comprehensive supplier, leading to their name change in 2012 to Mercury Systems, Inc. to reflect this broader focus.
What it actually does
Think of Mercury Systems as a provider of the high-tech 'brains' and 'senses' inside of complex defense equipment. They don't build the entire airplane or missile system, but they make the critical electronic components and subsystems that go into them. These are things like powerful, rugged computers for processing data in real-time, components that send and receive radio waves for radar and communications, and secure memory to store sensitive information. Their products are used by major defense contractors and government agencies in systems for electronic warfare (jamming enemy signals), radar, and intelligence gathering.
Integrated Subsystems
This is the company's largest business area, making up more than half of its revenue. In this segment, Mercury takes various electronic components and combines them into a single, more complex unit that performs a specific function, like a complete mission computer for an aircraft or a system for simulating radar signals for testing purposes. The customers for these subsystems are typically large defense companies (known as prime contractors) that are building a larger platform, like a new fighter jet or a naval ship, and need these specialized electronic systems to be pre-integrated and ready to be installed.
Modules and Sub-assemblies
This part of the business, which accounts for about a quarter of revenue, involves selling collections of electronic components that are mounted together on a board or in a module. These are like the building blocks for the larger integrated subsystems and include products like embedded processing boards (the core computer of a system), digital receivers that capture signals, and assemblies for radio frequency and microwave functions. Companies that buy these are often building their own larger systems and need these pre-assembled modules to handle specific processing or signal-handling tasks.
Components
This is the smallest part of their business, representing about a fifth of their revenue. Here, Mercury sells the individual electronic parts that are the most basic building blocks of their other products. This includes things like power amplifiers, filters, oscillators, and specialized computer chips and memory devices. The customers for these components are other manufacturers who need these specific, high-performance parts for the electronic systems they are designing and building.
What management is betting on now
After a period of growing by acquiring many other companies, Mercury's leadership is now focused on improving how all these different parts of the business work together. A key priority is operational excellence, which means making their manufacturing more efficient and reliable to increase profitability and generate more cash. They are also concentrating on a trend called 'processing at the edge,' which involves creating powerful, secure computing systems that can be placed directly on devices like drones or missiles to analyze data instantly. The company is also investing in adapting advanced commercial technology for the specific, rugged, and secure needs of the defense industry.
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 $24.15 vs current price $87.25
Wall Street consensus is the average analyst price target: $115.70 (379.1% higher than our fair-value estimate).
Our most-likely fair value is $24.15 a share — about 72.3% below today's price of $87.25, 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 1.5% (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
39.13x
P/B
3.47x
P/S
5.33x
EV/EBITDA
69.04x
PEG ratio
2.79x
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
—
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
—
Payout ratio
0.0%
Last ex-div date
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