Kratos Defense & Security Solutions Inc. Common Stock (KTOS)

FairStock Score: 31/100 — RISKY

Key Financials

AI Analysis

AI-generated, general educational analysis — not personal investment advice.

Kratos operates in defense electronics and unmanned systems, a niche with long contract cycles and specialized customers. The growth is real: in fiscal Q2 2026, the quarter ended 2026-06-28, revenue was $458.8 million, up from $351.5 million in fiscal Q2 2025, the quarter ended 2025-06-29. Net income rose to $4.4 million from $2.9 million. For FY2025 ended 2025-12-28, revenue was $1.3 billion and net income was $22.0 million, after FY2023 ended 2023-12-31 had a net loss of $8.9 million. That fits FairStock's Lynch category of TURNAROUND - returned to profit after a loss within the last three years. But the quality of that profit is poor. FairStock calculations show ROE of 1.15%, ROCE of 0.43%, and a Q2 2026 net margin of 0.96%. Free cash flow for the trailing twelve months was negative $128.9 million, a FCF yield of -1.7%. The balance sheet is conservative, with D/E of 0.06 and an Altman Z-Score of 7.32, yet the Piotroski F-Score is 2/9. Valuation at the 2026-10-13 close of $40.35 is demanding: P/E 237.35, P/B 2.21, EV/EBITDA 54.57, PEG 4.59, and a Graham Number of $8.36, a margin of safety of -382.66%. The stock is far below its 52-week high of $134.00, but a falling price alone is not value. I want high returns on capital and cash in the till. Kratos has a promising defense story, but today's earnings and cash flow do not justify the price.

In plain English: Kratos makes technology and hardware for defense and national security, including unmanned systems and satellite ground equipment. Sales are growing quickly and the company is profitable again after a loss a few years ago, but profit margins are very thin and cash flow is negative. At $40.35 on 2026-10-13, the stock looks expensive relative to the profits and net assets it reports, even though it is far below its 52-week high.

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Data as of 2026-10-13 close · note generated 2026-10-15 · model deepseek-flash

Sources (SEC EDGAR): fiscal Q2 2026 10-Q (period ended 2026-06-28) · fiscal Q1 2026 10-Q (period ended 2026-03-29) · fiscal Q3 2025 10-Q (period ended 2025-09-28) · fiscal Q2 2025 10-Q (period ended 2025-06-29) · FY2025 10-K (period ended 2025-12-28) · FY2024 10-K (period ended 2024-12-29) · FY2023 10-K (period ended 2023-12-31)

Fundamentals from company filings and market-data providers; prices are end-of-day, not real-time. AI-generated analysis is general and educational — not personal investment advice. Scoring methodology · Score test · Disclaimer