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what it is
Kratos sells military drones, satellite systems, microwave electronics, rocket support, and turbine tech to the U.S. defense world.
how it gets paid
Last year Kratos Def. & Sec made $1.3B in revenue.
why it's growing
Revenue grew 18.5% last year. Revenue of $1.0B mattered most because this stock needs the sales base to catch up with the valuation.
what just happened
Latest EPS came in at $0.18 versus a $0.13 estimate, but the bigger story was revenue hitting $1.0B.
At a glance
B balance sheet — gets the job done, barely
30/100 earnings predictability — expect surprises
178.1x trailing p/e — you're paying up for this one
8.5% return on capital — nothing to write home about
xvary composite: 37/100 — weak
What they do
Kratos sells military drones, satellite systems, microwave electronics, rocket support, and turbine tech to the U.S. defense world.
Kratos wins where the Pentagon wants low-cost hardware fast, not perfect hardware slowly. Its Government Solutions unit made 76% of 2024 sales, which gives you a real base while unmanned systems add upside. Defense contracting is sticky (long program ties → customers stay put → revenue lasts), so once Kratos gets designed in, your competitor does not just swap it out.
How they make money
$1.3B
annual revenue · their business grew +18.5% last year
total revenue
$1.3B
+18.5%
The products that matter
space and communications infrastructure
Satellite & Ground Systems
part of a $1.3B revenue base
this is one of the two business lines the snapshot identifies directly. it sits inside the $1.3B company revenue base that grew 34.5% last year, but the snapshot does not break out segment dollars.
mission critical
tactical and target drone systems
Unmanned Aerial Systems
growth story, thin disclosure
this is the part of the story investors usually pay up for. the company trades at 178.1x trailing earnings, so you need these programs to keep driving growth even though the snapshot gives no segment-level revenue split.
where expectations live
Key numbers
178.1x
trailing p/e
Trailing p/e → price versus last year's profit → so what: you are paying a luxury multiple for a company that earned about $0.50 a share in 2025.
$4B
2029 revenue est
2029 revenue estimate → expected sales five years out → so what: that is more than 3x today's $1.3B annual revenue, which shows how much future growth the story needs.
1.9%
operating margin
Operating margin → profit after running the business → so what: Kratos is still converting a thin slice of revenue into operating profit.
8.5%
return on capital
Return on capital → profit earned on the money used in the business → so what: this is decent, not elite, especially for a stock priced this aggressively.
Financial health
B
strength
- balance sheet grade B — adequate — nothing special
- risk rank 3 — safer than 50% of stocks
- price stability 20 / 100
- net profit margin 16.9% — keeps 17 cents of every dollar in revenue
- return on equity 8% — $0.08 profit for every $1 investors have put in
B — functional but not a standout on the balance sheet.
Total return vs. market
You invested $10,000 in KTOS 3 years ago → it's now worth $77,510.
The index would have given you $13,880.
source: institutional data · total return
What just happened
beat estimates
Latest EPS came in at $0.18 versus a $0.13 estimate, but the bigger story was revenue hitting $1.0B.
Revenue jumped 188% vs. prior year in the latest quarter, while gross margin was 22.4%. That is the kind of top-line surge investors want to see when a stock trades on future scale, not current margin.
$1.0B
revenue
$0.18
eps
22.4%
gross margin
the number that mattered
Revenue of $1.0B mattered most because this stock needs the sales base to catch up with the valuation.
-
we look for a strong profit gain at kratos defense & security solutions in 2026.profits over the past several years have been elusive due to rising costs for material, labor, and subcontracting. most of these increased expenses are unable to be recovered on certain fixed-price contracts that were signed several years ago. however, some of these contracts are maturing and new terms are being negotiated that will lead to higher margins. at the same time, demand is expected to remain strong for defense rocket systems, unmanned systems, and in the cyber business. kratos was expected to report fourth-quarter earnings shortly after we went to press for this issue.
-
we believe it earned about $0.50 a share.
-
for 2026, we estimate a 50% profit gain, to $0.75 per share, and another solid increase is forecast for 2027, to $1.00 share.
-
the company is adding capacity around the world to support its expected growth.the book-to-bill ratio has consistently exceeded 1.0 in recent quarters and backlog has been steadily rising. kratos is pursuing several multi-year, multi-billion-dollar contracts and is adding to its manufacturing base to support the demand. over the past several months, it has opened a 60,000-square-foot microwave electronics facility in jerusalem, a 55,000-square-foot hypersonic system manufacturing plant in maryland, and a 10,000-square-foot engine overhaul addition in british columbia. capital expenditures likely doubled in 2025, to $115 million, and we expect an additional jump in 2026, to about $170 million. all factors considered, we forecast another nice gain in profits in 2027, to $1.00 a share. This stock is not for the faint of heart.
-
it has demonstrated sharp price movements in both directions.
source: company earnings report, 2026
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What could go wrong
the #1 risk is program delays in tactical drones and satellite procurement.
med
procurement timing can break the growth story fast
kratos sells into government programs that move on government calendars. if awards slip or deployment timelines stretch, revenue can look lumpy even when the long-term demand story stays intact.
impact: with the stock at 178.1x trailing earnings, even a short delay against a $1.3B revenue base can hit sentiment hard because investors are paying for speed.
med
bigger contractors can crowd the niche
the niche is attractive precisely because defense spending is shifting toward autonomous and space-linked systems. if larger primes decide they want that growth more aggressively, kratos may have to win on execution rather than scale.
impact: low returns today — 5.5% return on capital and 4% return on equity — leave less room for strategic mistakes than the market multiple suggests.
med
the multiple assumes a cleaner earnings ramp than the company has shown
earnings predictability is just 30/100, the latest quarter produced $0.05 of EPS, and the stock still trades at 178.1x trailing earnings. that is a lot of faith packed into one number.
impact: if EPS progress stalls around the current $0.75 FY2026 estimate, you are left owning a growth stock without much room for disappointment.
178.1x trailing earnings plus 30/100 predictability is the real risk stack: the company does not need a disaster to disappoint the stock. it just needs growth to arrive slower than expected.
source: institutional data · regulatory filings · risk analysis
Pay attention to
earnings
next quarter's EPS conversion
revenue growth is already here. what matters next is whether quarterly EPS can move meaningfully above $0.05.
metric
return on capital
5.5% return on capital is low for a stock with a premium multiple. if that number does not improve, the valuation argument stays fragile.
risk
contract timing and defense budgets
watch for any sign that drone or satellite-related awards are slipping. with disclosure this thin, timing matters almost as much as volume.
trend
can growth stay high as the base gets bigger
34.5% growth off a $1.3B base is impressive. holding anything close to that pace on the way toward a $2B revenue estimate is the real test.
Analyst rankings
short-term outlook
bottom 5%
momentum score 5 is the worst bracket. in human-speak, the model does not like the near-term setup.
risk profile
average
stability score 3 means this looks like a middle-of-the-pack risk profile, not a bunker stock and not pure chaos.
chart momentum
top 20%
technical score 2 says the chart still has support. the mixed signal versus the weak short-term outlook tells you this setup is not exactly clean.
earnings predictability
30 / 100
earnings are hard to model here. that matters more when the stock already trades as if the next few years will go mostly right.
source: institutional data
Institutional activity
institutions have been net buying for 3 consecutive quarters — 368 buyers vs. 247 sellers in 3q2025. total institutional holdings: 0.2B shares. net buying for 3 quarters.
source: institutional data
Price targets
3-5 year target range
$59
$161
$89
current price
$110
target midpoint · +24% from current · 3-5yr high: $125 (+40% · 9% ann'l return)
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