Is Kratos Defense & Security Solutions (KTOS) Still Attractive After Its Recent Pullback?

Simply Wall St.04-22 10:09

If you are wondering whether Kratos Defense & Security Solutions at US$68.55 still offers value after a strong run, it helps to step back and look at what the current price might already be assuming. ...

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The stock has given up 6.9% over the past week and 19.0% over the past month, yet it still sits on a 113.4% return over the last year and a very large gain over three years, with a 153.0% return over five years. Recent market attention around defense and security spending has kept companies like Kratos firmly on investors' radar. Broader sector headlines and sentiment shifts help explain why a stock with strong multi year returns can still see sharp short term pullbacks. Kratos currently scores 1 out of 6 on Simply Wall St's valuation checks, as shown by its valuation score. The next step is to compare what traditional valuation methods say about the stock today and then look at a more complete way to think about value at the end of this 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. AdvertisementApproach 1: Kratos Defense & Security Solutions Discounted Cash Flow (DCF) Analysis A Discounted Cash Flow, or DCF, model estimates what a company might be worth by projecting its future cash flows and then discounting those back to today using a required rate of return. For Kratos Defense & Security Solutions, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is a loss of $120.81 million. Analyst and extrapolated projections suggest free cash flow of $92.55 million by 2028, with further estimated figures rising over the following years as part of the ten year forecast supplied by Simply Wall St. Based on these cash flow projections, the DCF model arrives at an estimated intrinsic value of US$82.30 per share. Compared with the current share price of US$68.55, this implies the stock trades at around a 16.7% discount, which indicates that Kratos appears undervalued according to this model. Result: UNDERVALUED Our Discounted Cash Flow (DCF) analysis suggests Kratos Defense & Security Solutions is undervalued by 16.7%. Track this in your watchlist or portfolio, or discover 58 more high quality undervalued stocks. KTOS Discounted Cash Flow as at Apr 2026 Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Kratos Defense & Security Solutions. Approach 2: Kratos Defense & Security Solutions Price vs Sales For companies where earnings can be uneven or heavily affected by non cash items, the P/S ratio is often a useful yardstick because it compares what you are paying to the revenue the business is generating today. In general, higher expected growth and lower perceived risk can justify a higher “normal” or “fair” P/S multiple. Slower growth and higher risk tend to support a lower multiple. That is why simply looking at one number in isolation rarely tells you much. Kratos currently trades on a P/S of 9.53x. This sits above both the Aerospace & Defense industry average P/S of 5.68x and the peer average of 1.96x. Simply Wall St’s Fair Ratio for Kratos is 3.53x, which is the P/S level suggested by its model after considering factors such as earnings growth, industry, profit margin, market cap and company specific risks. The Fair Ratio is often more helpful than a straight peer or industry comparison because it adjusts for these business characteristics rather than assuming all companies deserve the same multiple. Comparing 9.53x with the Fair Ratio of 3.53x indicates Kratos is trading above that modelled fair range. Result: OVERVALUED NasdaqGS:KTOS P/S Ratio as at Apr 2026 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 simple, user created stories that connect your view of Kratos Defense & Security Solutions to specific assumptions for future revenue, earnings, margins and a Fair Value that can be compared with today’s price. Each Narrative on Simply Wall St’s Community page ties the company’s story to a full forecast and Fair Value, then helps you decide whether Kratos looks expensive or cheap by showing how that Fair Value sits against the live share price. Because Narratives update automatically when new earnings, guidance or news are added to the platform, your thesis is kept current without needing to rebuild your model every time something changes. For Kratos, one investor might lean toward a higher Fair Value around US$136.86 with assumptions closer to the more optimistic views on growth and margins, while another might prefer a lower Fair Value near US$85 that reflects the more cautious case. Narratives let you pick, adjust and monitor the version that best matches your own expectations. 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! NasdaqGS:KTOS 1-Year Stock Price Chart  This article by Simply Wall St is general in nature. We provide commentary based on historical data\n    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\n    financial situation. We aim to bring you long-term focused analysis driven by fundamental data.\n    Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.\n    Simply Wall St has no position in any stocks mentioned.Valuation is complex, but we're here to simplify it.Discover if Kratos Defense &amp; Security Solutions might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.Access Free AnalysisHave feedback on this article? Concerned about the content? Get in touch with us directly. 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