Key Takeaways
- Kratos shares fell 15% in the past week to a new 52-week low, mostly in a growth-stock selloff before its third-quarter report.
- The quarter was strong. Revenue rose 35.7% and the backlog hit a record $2.65 billion. Kratos also raised its 2026 guidance and forecast $2.1 to $2.2 billion of revenue for 2027.
- The stock trades well below its 5-year average multiple, so the selling looks overdone, though Kratos is still burning cash.
Kratos Defense & Security Solutions (KTOS) is down 15% in the past week and hit a new 52-week low on Friday. That came the morning after it beat estimates and raised its 2026 guidance.
The selling came before the numbers
Most of the drop came on Wednesday and Thursday, before Kratos reported after Thursday’s close, with no company news behind it. The Nasdaq 100 fell 5% over the week, and plenty of high-multiple growth stocks fell further, from AI hardware to defense tech. Kratos still traded at a premium going in, though far below its Jan. 16 peak of 183x forward earnings.
The quarter was anything but weak
Then Kratos reported a strong third quarter:
- Revenue of $471.8 million, up 35.7% (23.2% organic)
- Bookings of $1.037 billion, for a 2.2 book-to-bill, and a record $2.65 billion backlog
- A first 2027 forecast of $2.1 to $2.2 billion of revenue and $230 to $240 million of adjusted EBITDA
CEO Eric DeMarco said the quarter’s 10.8% adjusted EBITDA margin was “demonstrating leverage of the business as production quantities increase and as Kratos continues to scale, which we expect to continue into 2027.” Going into the report, analysts expected normalized EPS to more than double, from $0.55 in 2025 to $1.46 in 2028:
And with Kratos guiding to wider margins in 2027, I don’t see a reason for them to cut.
TIKR tracks 25 analysts on Kratos Defense & Security Solutions. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Kratos Defense & Security Solutions, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Kratos Defense & Security Solutions’ Analyst Ratings
Cheap, with one catch
At Friday’s close, Kratos traded at 34x forward earnings, well below its 5-year average of 58x:
Kratos still burned $29.4 million of free cash flow in the quarter. And it has already sold stock to pay for its new drone and hypersonic plants. Another sale would dilute shareholders again. BTIG cut its target to $65 from $104 on Friday and kept its Buy rating. But even $65 is 85% above Friday’s close.
Still, I think the selling is overdone. Kratos is forecasting about 20% revenue growth next year and has a record backlog, so it deserves more than a multiple this far below its average. The fourth-quarter report early next year is the one to watch. If the cash burn eases without another stock sale, investors should start paying up again.
So what is Kratos stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
