Kratos (KTOS) Stock Looks Rich On Cash Flow And Sales
Kratos Defense & Security Solutions has dropped sharply in recent months, yet the stock still trades at a level that the Discounted Cash Flow (DCF) intrinsic value estimate and market multiples both flag as expensive. Recent contract wins in missile targets and satellite communications add operational momentum, but the valuation work suggests investors are paying a premium for that story.
- Over the past 3 years, Kratos Defense & Security Solutions has returned about 220%, which leaves today’s pullback sitting on top of a very strong multi year run.
- Success in areas such as the ARAV B ballistic missile targets and mobile SATCOM gateways can support expectations for future cash flows, while reliance on periodic defense contract awards may leave those cash flows exposed to timing and budget risks.
- The broader checks indicate Kratos screens as expensive rather than a clear bargain, with 0 of 6 value factors suggesting undervaluation.
The issue now is whether the recent share price weakness has gone far enough to bring Kratos Defense & Security Solutions closer to its intrinsic value estimate or whether it still trades at a marked premium.
Spot potential alternatives to Kratos Defense & Security Solutions by scanning for premium quality companies with room to rerate using our hand picked 31 high quality undervalued stocks.Does Kratos Defense & Security Solutions Look Pricey on Cash Flow?
The Discounted Cash Flow model for Kratos Defense & Security Solutions takes the company’s projected free cash flows and discounts them back to today’s dollars. Kratos currently reports latest twelve month free cash flow of about $128 million in outflows, yet the model assumes a recovering path that shifts into positive territory over time.
On those projections, the DCF points to an intrinsic value of about $37.71 per share in $ and indicates the stock trades roughly 23.8% above that mark, so it screens as overvalued on this lens. The recent $20 million mobile SATCOM gateways award adds support for the long term cash flow story, but the market already prices Kratos as if that improvement is firmly in hand.
Put simply, the DCF work suggests Kratos Defense & Security Solutions currently looks overvalued relative to its modeled cash generation.
Our Discounted Cash Flow (DCF) analysis suggests Kratos Defense & Security Solutions may be overvalued by 23.8%. Discover 31 high quality undervalued stocks or create your own screener to find better value opportunities.
Is Kratos Defense & Security Solutions Getting Expensive on Sales?
P/S is a clean way to think about Kratos Defense & Security Solutions because the business is still working through free cash flow swings while revenue remains the clearest anchor. On this measure, the stock trades at about 5.8x sales, compared with an Aerospace & Defense industry average of roughly 4.2x and a peer group around 1.8x.
The valuation model pegs a fair P/S multiple for Kratos near 3.2x. This sits well below the current 5.8x level and points to investors paying a sizable premium for each dollar of revenue. That gap suggests the market is already assigning extra value to the contract pipeline and technology positioning, rather than treating Kratos Defense & Security Solutions as a typical sector player.
On the P/S yardstick, Kratos Defense & Security Solutions screens as clearly overvalued relative to the revenue-based multiple implied by its fair ratio and peer group.
See what the numbers say about this price — find out in our valuation breakdown.
The Kratos Defense & Security Solutions Narrative: What Would Justify Today's Price?
Simply Wall St Narratives for Kratos Defense & Security Solutions pick up exactly where this valuation puzzle leaves off and spell out which paths for revenue, profitability and earnings would need to play out for the stock to look meaningfully cheaper or richer than today’s quote on the Community page. Each narrative ties a specific fair value to a particular mix of potential catalysts and risks, so you can see over time which version of Kratos Defense & Security Solutions' story is actually unfolding.
One of the top community narratives on Kratos Defense & Security Solutions: 56% undervalued
"Kratos' early investments in serial production of tactical drones (e.g., Valkyrie) and rapid scaling in missile propulsion and microelectronics put it ahead of competitors as demand for unmanned and autonomous solutions escalates globally..."
Read one of the top narratives on Kratos Defense & Security Solutions
Do you think there's more to the story for Kratos Defense & Security Solutions? Head over to our Community to see what others are saying!
The Bottom Line
Kratos Defense & Security Solutions screens as overvalued on both the Discounted Cash Flow (DCF) intrinsic value view and the sales multiple work, which points to investors already paying up for the contract story. The gap between current pricing and intrinsic value rests on expectations that future programs convert into sustained cash generation and support today’s richer revenue multiple. What really separates bulls and bears now is confidence in that cash flow trajectory and how much volatility in defense awards you are comfortable underwriting at this premium.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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