- If you are wondering whether Kratos Defense & Security Solutions is still good value after a strong run, this article breaks down what the current share price might be implying about the company.
- The stock last closed at US$74.46, with returns of 10.6% over 7 days, a 16.3% decline over 30 days, a 6.1% decline year to date, and a 1 year return of 134.8%, alongside a 3 year return of 468.8% and a 5 year return of 164.5%.
- These moves sit against a backdrop of ongoing investor attention on defense and security names, where contract pipelines, government spending priorities and sector sentiment can quickly shift how the market prices companies like Kratos Defense & Security Solutions. For long term holders and new investors alike, that context matters when assessing whether recent gains still reflect the fundamentals or simply changing risk appetite.
- Kratos Defense & Security Solutions currently scores 1 out of 6 on Simply Wall St's valuation checks. You can see the breakdown in its valuation score. Next up is a look at how different valuation approaches frame the stock, followed by a way to go beyond the numbers at the end of the article.
Kratos Defense & Security Solutions scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Kratos Defense & Security Solutions Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model takes projected future cash flows, discounts them back to today using a required return, and adds them up to estimate what the business might be worth now.
For Kratos Defense & Security Solutions, the latest twelve month Free Cash Flow is a loss of $120.81 million. Analysts and extrapolated estimates in the model show Free Cash Flow moving from a loss of $90.43 million in 2026 and $16.14 million in 2027 to a projected $92.55 million in 2028, then rising further in the following years. All figures are in $ and remain below $1b in the forecast window.
Using a 2 Stage Free Cash Flow to Equity model based on these cash flows, the estimated intrinsic value is $84.07 per share. Against the recent share price of $74.46, this implies the stock trades at an 11.4% discount, which indicates that Kratos Defense & Security Solutions appears undervalued on this DCF view.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Kratos Defense & Security Solutions is undervalued by 11.4%. Track this in your watchlist or portfolio, or discover 64 more high quality undervalued stocks.
Approach 2: Kratos Defense & Security Solutions Price vs Sales
For companies where earnings can be volatile or less meaningful, the P/S ratio is often a useful way to think about valuation because it compares what you pay for each dollar of revenue, rather than profit. The higher the growth investors expect and the lower the perceived risk, the more they are usually willing to pay in terms of a higher P/S multiple.
Kratos Defense & Security Solutions currently trades on a P/S of 10.36x. This sits above the Aerospace & Defense industry average P/S of 5.23x and the peer average of 7.68x. Simply Wall St’s Fair Ratio metric suggests a P/S of 3.58x for Kratos Defense & Security Solutions, based on factors such as its earnings growth profile, industry, profit margins, market capitalization and risk characteristics.
The Fair Ratio aims to give you a more tailored benchmark than simple peer or industry comparisons, because it adjusts for company specific features like growth outlook, risk and profitability instead of assuming one size fits all. Comparing the current P/S of 10.36x to the Fair Ratio of 3.58x points to the shares trading well above what this model indicates as a more balanced level.
Result: OVERVALUED
P/S ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 19 top founder-led companies.
Upgrade Your Decision Making: Choose your Kratos Defense & Security Solutions Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced here as your way of attaching a clear story to the numbers, where your view on Kratos Defense & Security Solutions' future revenue, earnings, margins and fair value is made explicit and easy to compare with others.
A Narrative on Simply Wall St connects three things: your view of the business, a financial forecast, and a resulting fair value, all in one place on the Community page that is used by millions of investors.
Once you set up a Narrative, the platform keeps it updated when new information comes in, such as earnings results, news, contract wins or guidance changes. This means your fair value view stays aligned with the latest data without you needing to rebuild a model each time.
Narratives then help you decide what action makes sense for you by simply comparing your Fair Value to the current share price. For example, one investor might adopt a cautious Kratos Defense & Security Solutions Narrative anchored to a Fair Value of US$85.0, while another uses a far more optimistic Narrative around US$136.86, reflecting different readings of the same company data.
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!
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com