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Verdict
Quantitative factor alignment verified for current market regime.
Quant Score
Rank
#1146
Positioning
Market Dominance
Manufacturing
Defense
$14.6B
Eric M. DeMarco
Kratos Defense & Security Solutions, Inc. operates as a government contractor of the U.S. Department of Defense. The Unmanned Systems segment provides unmanned aerial systems, and unmanned ground and seaborne systems. The company was incorporated in 1994 and is headquartered in San Diego, California.
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| Stock | Rating | Score▼ | Quality | Value | Momentum | P/E | EV/EBITDA | ROE | ROA | Gross Mgn | Op Mgn | Net Mgn | Rev Growth | Div Yield | D/E | Mkt Cap | AUDIT |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
$UL UNILEVER PLC | 78 | 96 | 98 | 59 | - | - | 28.5% | 8.0% | 100.0% | 100.0% | 10.4% | -4.6% | 3.3% | 0.0x | $141.8B | VS | |
$ASML ASML HOLDING NV | 77 | 89 | 86 | 83 | - | - | 46.1% | 16.6% | 51.3% | 31.9% | 26.8% | -4.0% | 1.0% | 25.0x | $272.1B | VS | |
$ESLT ELBIT SYSTEMS LTD | 76 | 81 | 87 | 85 | - | - | 10.3% | 3.1% | 24.1% | 7.2% | 4.7% | 14.3% | 0.8% | 25.0x | $11.4B | VS | |
$MT ArcelorMittal | 75 | 71 | 98 | 85 | - | - | 2.2% | 1.5% | 9.3% | 5.3% | 2.2% | -8.5% | 2.2% | 16.0x | $18.9B | VS | |
$AMAT APPLIED MATERIALS INC /DE | 75 | 85 | 87 | 84 | 20.9x | 13.6x | 35.5% | 19.8% | 48.7% | 29.2% | 24.7% | 4.4% | 0.8% | 32.0x | $181.9B | VS | |
$SIMO Silicon Motion Technology CORP | 75 | 84 | 86 | 85 | - | - | 11.8% | 8.8% | 45.9% | 11.3% | 11.1% | 25.7% | 3.7% | 0.0x | $1.8B | VS | |
$CODA Coda Octopus Group, Inc. | 74 | 83 | 90 | 79 | 16.3x | 11.9x | 7.6% | 7.0% | 66.5% | 17.1% | 15.6% | 39.0% | 0.0% | 0.0x | $115M | VS | |
$GSK GSK plc | 74 | 84 | 90 | 70 | - | - | 22.6% | 4.9% | 71.2% | 12.8% | 9.4% | 1.7% | 5.9% | 124.0x | $72.1B | VS | |
$EFXT Enerflex Ltd. | 74 | 80 | 91 | 83 | - | - | 3.0% | 1.1% | 20.9% | 7.3% | 1.3% | 3.0% | 0.9% | 67.0x | $1.2B | VS | |
$BUD Anheuser-Busch InBev SA/NV | 74 | 84 | 97 | 63 | - | - | 8.2% | 3.5% | 55.3% | 25.9% | 12.4% | 0.7% | 1.7% | 0.0x | $87.0B | VS | |
$KTOS KRATOS DEFENSE & SECURITY SOLUTIONS, INC. | 56 | 45 | 51 | 85 | 847.9x | 684.7x | 1.0% | 0.8% | 23.1% | 1.9% | 1.5% | 15.8% | 0.0% | 22.0x | $14.6B | ||
| SECTOR BENCH | - | - | - | - | - | 22.3x | 11.5x | -2.5% | -0.1% | 42.5% | 1.3% | -0.2% | 5.9% | 0.0% | 0.2x | - | REF |
KRATOS DEFENSE & SECURITY SOLUTIONS, INC. (KTOS) receives a "Hold" rating with a composite score of 56.0/100. It ranks #1146 out of 7,333 stocks in our coverage universe and carries a 3-star rating. Ratings are driven by a 6-factor quantitative model measuring quality, value, momentum, investment, stability, and short interest.
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YOY expansion rate
Core pricing power
Operating efficiency
Bottom-line conversion
Equity capital efficiency
Asset base utilization
Financial leverage load
Direct cash return
Eric M. DeMarco
Chief Executive Officer
Labor Force
3,600
45
26
52
Audit Verdict: Lower quality and stability scores may indicate governance concerns.
No recent insider transactions available for KTOS
Outperforming peers — winners tend to keep winning over 3-12 months
Fair valuation relative to peers
Average quality profile
Average volatility — neutral timing signal
Aggressive spending — empire-building risk, dilutive growth
Mid-range overall rating
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Relative valuation derived from Manufacturing sector benchmarks. Model weights: EV/EBITDA (40%), P/B (35%), P/S (25%). Re-calculated daily.
Projection based on user-defined inputs. Re-calculated daily against current market data.
Reverse DCF Framework — Mauboussin Methodology
Institutional-grade Reverse DCF analysis. This model identifies the growth hurdles embedded in current market prices. When implied growth is significantly lower than historical or projected rates, a margin of safety may exist. Re-audited daily.
No analyst ratings for KTOS.
View All RatingsMaterial decline in asset turnover efficiency detected
High margin volatility — erratic forensic earnings quality
| Factor | Global | Sector | Tilt |
|---|---|---|---|
| PROFITABILITY | 45 | 24 | +21ALPHA |
| MOMENTUM | 85 | 90 | -5NEUTRAL |
| VALUATION | 51 | 30 | +21ALPHA |
| INVESTMENT | 26 | 22 | +4NEUTRAL |
| STABILITY | 52 | 38 | +14ALPHA |
| SHORT INT | 81 | 90 | -9DRAG |
Global = full universe. Sector = relative to industry peers. Positive tilt indicates idiosyncratic strength.
ROE proxy 1.0% (sector -2.5%)
GM 23% vs sector 43%, OM 2% vs sector 1%
Capital turnover N/A, R&D intensity 3.0%
Rev growth 16%, 10yr history
Interest coverage N/A, Net debt/EBITDA -62.9x
Composite assessment of profitability, capital efficiency, and financial strength. Top-tier entities demonstrate sustainable cash flow generation and elite competitive moats.
Profit generated per dollar of shareholder equity
Efficiency of asset utilization
Pricing power and cost efficiency
Core business profitability
Bottom-line profitability
The Quality factor evaluates the persistence and magnitude of realized cash flows. Companies with scores >70 exhibit superior pricing power and structural financial resilience through diverse economic regimes.
Our uncertainty rating tracks the predictability of future cash flows and potential for permanent capital loss. Moderate visibility with standard industry cyclicality.
Our model assigns KRATOS DEFENSE & SECURITY SOLUTIONS, INC. a Hold rating, with a composite score of 56.0/100 and 3 out of 5 stars. Ranked #1146 of 7,333 stocks, KTOS presents a mixed quantitative picture — neither compelling enough to initiate new positions nor weak enough to warrant selling. Investors already holding may consider maintaining their position while monitoring for changes in the factor profile.
With a quality score of 45/100, KTOS shows adequate but unremarkable business quality. The company reports a return on equity of 1.0% (sector avg: -2.5%), gross margins of 23.1% (sector avg: 42.5%), net margins of 1.5% (sector avg: -0.2%). This suggests the company generates acceptable returns but may lack the competitive positioning or operational efficiency to stand out from peers.
KTOS's value score of 51/100 indicates the stock is fairly valued based on its current fundamentals. Key valuation metrics include a P/E ratio of 847.94x, an EV/EBITDA of 684.74x, a P/B ratio of 8.26x. At this level, neither a clear bargain nor overpriced, the stock's attractiveness depends more on forward growth expectations and qualitative factors.
KRATOS DEFENSE & SECURITY SOLUTIONS, INC.'s investment score of 26/100 suggests limited reinvestment activity. Key growth metrics include revenue growth of 15.8% vs. a sector average of 5.9% and a return on assets of 0.8% (sector: -0.1%). While this can be positive for mature, cash-generative businesses returning capital to shareholders, it may also signal a lack of growth opportunities or management conservatism.
KTOS shows strong momentum characteristics with a score of 85/100. The stock has been trending above key moving averages, indicating solid demand from institutional buyers. Revenue growth stands at 15.8% year-over-year, while a beta of 1.12 reflects its sensitivity to broader market moves. This level of momentum typically signals sustained investor confidence and favorable near-term price action.
With a stability score of 52/100, KTOS exhibits average financial resilience. Key stability metrics include a beta of 1.12 and a debt-to-equity ratio of 22.00x (sector avg: 0.2x). While the balance sheet is not a major concern, the stock is subject to typical market volatility and may experience sharper drawdowns during risk-off episodes.
KTOS's short interest factor score of 81/100 indicates very low short selling activity relative to peers — a positive signal suggesting institutional investors see limited near-term downside. Specific risk factors include elevated leverage (D/E: 22.00x). As a large-cap company with a market capitalization of $14.6B, KRATOS DEFENSE & SECURITY SOLUTIONS, INC. benefits from the generally lower volatility and deeper liquidity associated with its size class.
KRATOS DEFENSE & SECURITY SOLUTIONS, INC. is a large-cap company in the Manufacturing sector, ranked #0 of 50 in its sector (100th percentile) and #1146 of 7,333 overall (84th percentile). Key comparisons include ROE of 1.0% exceeding the -2.5% sector median and operating margins of 1.9% above the 1.3% sector average. This top-quartile standing reflects exceptional competitive strength relative to Manufacturing peers.
While KTOS currently exhibits a HOLD profile, superior opportunities exist within the MANUFACTURING sector. Our model identifies several "Strong Buy" candidates with higher quality scores and more attractive valuations among direct industry competitors.
View Top Manufacturing Alpha →Quant Factor Profile
Key factor gap
Momentum (85) vs Investment (26) — closing this gap could shift the rating.
EV/EBITDA 5875% ABOVE SECTOR MEDIAN
ROE 139% BELOW SECTOR MEDIAN
Gross Margin 46% BELOW SECTOR MEDIAN
AUDIT DATA AS OF SEP 28, 2025 (Q2 FY2025)
We rate KRATOS DEFENSE & SECURITY SOLUTIONS, INC. (KTOS) as a Hold with a composite score of 56.0/100 at a current price of $91.00. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.
The rating is primarily driven by strength in momentum (85th percentile) and stability (52th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (26th percentile) and quality (45th percentile) tempers our overall conviction. We assign a No Moat rating (39/100), Low uncertainty, and Standard capital allocation.
Key items to watch: quarterly earnings execution and sector-level competitive dynamics. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.
KRATOS DEFENSE & SECURITY SOLUTIONS, INC. holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 56.0/100 places it at rank #1146 in our full 7,333-stock universe. With a $14.6B market capitalization, KRATOS DEFENSE & SECURITY SOLUTIONS, INC. operates at meaningful scale within the Manufacturing sector, providing competitive advantages in distribution, procurement, and customer reach.
The near-term outlook is constructive, with revenue growing at 16% and momentum in the 85th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 26th percentile indicates reinvestment patterns that investors should monitor for sustainability.
The margin cascade tells an important story: gross margins of 23% (-19.4pp vs sector) narrow to operating margins of 2% (+0.6pp vs sector) and net margins of 1.5%, yielding a gross-to-net conversion rate of 6%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.
At a current price of $91.00, KRATOS DEFENSE & SECURITY SOLUTIONS, INC. is trading near fair value based on current fundamentals. Our value factor score of 51/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.
The stock currently trades at a P/E of 847.9x (a 3711% premium to the sector median of 22.3x), EV/EBITDA of 684.7x (at a premium), P/B of 8.3x, P/S of 12.8x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.
Revenue growth of 16% confirms the business is expanding its addressable market — growth at this level typically supports multiple expansion and attracts institutional capital.
A conservative balance sheet (22% D/E) provides financial flexibility for acquisitions, buybacks, or weathering economic downturns without dilution.
Positive momentum (85th percentile) indicates institutional accumulation and favorable technical dynamics that tend to persist in the intermediate term.
A P/E of 847.9x leaves little room for execution misses — any earnings disappointment could trigger a sharp multiple compression.
Thin net margins of 1.5% provide limited cushion against cost pressures, competitive pricing, or macroeconomic headwinds — even small changes in costs could swing the company to a loss.
We assign a Low uncertainty rating to KRATOS DEFENSE & SECURITY SOLUTIONS, INC.. The company exhibits strong financial stability with a beta of 1.12, conservative leverage (22% D/E), and a stability factor in the 52th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.
Specific risk factors that inform our assessment include: elevated valuation multiple (P/E 847.9x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 52th percentile and quality factor at the 45th percentile provide a quantitative summary of the overall risk landscape.
Key risk mitigants include: conservative leverage (22% D/E) limits balance sheet risk. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.
We rate KRATOS DEFENSE & SECURITY SOLUTIONS, INC.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 1.0%, and the balance sheet is managed within acceptable parameters (D/E: 22%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; KRATOS DEFENSE & SECURITY SOLUTIONS, INC. falls short on at least one dimension.
There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.
In summary, KRATOS DEFENSE & SECURITY SOLUTIONS, INC. receives a Hold rating with a composite score of 56.0/100 (rank #1146 of 7,333). Our quantitative framework assigns a No Moat (39/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 52/100.
Our analysis supports a neutral stance on KRATOS DEFENSE & SECURITY SOLUTIONS, INC.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.
Analysis derived from Blank Capital Research quantitative terminal. For informational purposes only. No trade solicitation. Past performance not indicative of future results. Consult a qualified advisor.
We do not assign KRATOS DEFENSE & SECURITY SOLUTIONS, INC. a meaningful economic moat, scoring 39/100 on our composite assessment. Current fundamentals do not demonstrate the kind of durable competitive advantages — such as superior returns on invested capital, margin superiority, or reinvestment efficiency — that would protect the company from competitive erosion over the long term. The highest-scoring pillar, growth durability, reached only 15.3/20.
The strongest moat sources are growth durability (15.3/20) and margin superiority (10/20). Rev growth 16%, 10yr history. GM 23% vs sector 43%, OM 2% vs sector 1%. These pillars form the core of KRATOS DEFENSE & SECURITY SOLUTIONS, INC.'s competitive identity and are the primary drivers of excess returns in our framework.
Areas of relative weakness include reinvestment efficiency (1.1/20) and economic value creation (3/20). Capital turnover N/A, R&D intensity 3.0%. Improvement in these areas could meaningfully widen the moat over time, while deterioration would be an early warning of competitive erosion.
Our moat trend assessment is Stable. Multi-year ROIC and operating margin trajectories show neither meaningful improvement nor deterioration, suggesting the competitive position is steady. We expect KRATOS DEFENSE & SECURITY SOLUTIONS, INC.'s moat profile to remain largely unchanged absent a material shift in return on capital or industry dynamics.
Key profit drivers include robust top-line growth of 16% expanding the revenue base. The margin cascade from 23% gross to 2% operating to 1.5% net reveals the company's cost structure and reinvestment intensity. Our analysis indicates that profit quality is adequate though not exceptional, with the quality factor at the 45th percentile.
The margin profile shows gross margins of 23%, operating margins of 2%, net margins of 1.5%. Return metrics include ROE of 1.0% and ROA of 0.8%. Relative to the Manufacturing sector, gross margins are 19.4 percentage points below the sector median of 43%, and ROE of 1.0% compares to a sector median of -2.5%.
The balance sheet reflects a conservatively managed balance sheet with D/E of 22%, revenue growth of 16%. The sector median D/E is 0%, putting KRATOS DEFENSE & SECURITY SOLUTIONS, INC. at higher leverage than the typical peer. Overall balance sheet health is adequate for the current business environment.
Elevated short interest (81th percentile) indicates that sophisticated market participants are betting against the stock.
Above 50MA
37.18%
Net New Highs
+51081
Kratos Defense & Security Solutions stock fell 12% this week due to geopolitical tensions over the Greenland dispute between the U.S. and Europe, which raised concerns about European defense spending. Additionally, Piper Sandler initiated a neutral rating with a $99 price target, below the stock's current $113 level. Despite the decline, the stock remains up 234% over the past year, but analysts warn its P/S ratio of 14+ is expensive even accounting for its 24% organic revenue growth.
Shares of aerospace and defense company Kratos (NASDAQ:KTOS) fell 5.7% in the morning session after the company's weak first-quarter revenue guidance overshadowed its strong fourth-quarter results.
General Electric and Kratos Defense & Security Solutions announced a $12.4 million U.S. Air Force contract to design the GEK1500 engine for next-generation Collaborative Combat Aircraft. The engine will offer 1,500-pound thrust capacity while maintaining cost-effectiveness. Despite the positive contract news, GE shares declined 1.23% as broader market weakness overshadowed the announcement.
Physical AI—intelligence embedded in machines that can see, reason, and act in the real world—is emerging as a trillion-dollar transformation. Bank of America's thematic investing team identifies this shift from digital models to physical machines like robots, autonomous vehicles, and drones as a major investment opportunity. Humanoid robots are moving into production with over 50 companies developing platforms, while robotaxis are already operational in multiple cities. The article highlights 15 publicly traded companies positioned to lead this Physical AI revolution across chips, robotics, mobility, and sensing sectors.
The Pentagon announced a four-stage Drone Dominance Program worth $1.1 billion to procure approximately 340,000 military drones. Twenty-five companies are competing in Phase 1, with only five ultimately winning. Of the competitors, only two are publicly traded: Kratos Defense and Red Cat Holdings (via Teal Drones subsidiary). Winners could earn up to $142.5 million each across all phases.