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Verdict
Quantitative factor alignment verified for current market regime.
Quant Score
Rank
#1406
Positioning
Market Dominance
Manufacturing
Electronic Equipment
$4.6B
Mark Aslett
Mercury Systems, Inc. engages in the manufacture and sale of components, products, modules, and subsystems for aerospace and defense industries in the United States, Europe, and Asia Pacific. The company's products and solutions are deployed in approximately 300 programs with 25 defense contractors and commercial aviation customers.
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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 | |
$MRCY MERCURY SYSTEMS INC | 54 | 46 | 58 | 78 | - | 139.7x | -4.4% | -2.6% | 27.1% | -5.6% | -7.2% | 13.9% | 0.0% | 71.0x | $4.6B | ||
| SECTOR BENCH | - | - | - | - | - | 22.3x | 11.5x | -2.5% | -0.1% | 42.5% | 1.3% | -0.2% | 5.9% | 0.0% | 0.2x | - | REF |
MERCURY SYSTEMS INC (MRCY) receives a "Hold" rating with a composite score of 53.9/100. It ranks #1406 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
Mark Aslett
Chief Executive Officer
Labor Force
2,390
46
27
62
Audit Verdict: Lower quality and stability scores may indicate governance concerns.
No recent insider transactions available for MRCY
Outperforming peers — winners tend to keep winning over 3-12 months
Fair valuation relative to peers
Average quality profile
Low volatility — smoother ride and historically better risk-adjusted returns
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.
No analyst ratings for MRCY.
View All RatingsMaterial decline in asset turnover efficiency detected
High margin volatility — erratic forensic earnings quality
| Factor | Global | Sector | Tilt |
|---|---|---|---|
| PROFITABILITY | 46 | 24 | +22ALPHA |
| MOMENTUM | 78 | 81 | -3NEUTRAL |
| VALUATION | 58 | 39 | +19ALPHA |
| INVESTMENT | 27 | 25 | +2NEUTRAL |
| STABILITY | 62 | 51 | +11ALPHA |
| SHORT INT | 53 | 57 | -4NEUTRAL |
Global = full universe. Sector = relative to industry peers. Positive tilt indicates idiosyncratic strength.
ROE proxy -4.4% (sector -2.5%)
GM 27% vs sector 43%, OM -6% vs sector 1%
Capital turnover N/A, R&D intensity 6.2%
Rev growth 14%, 11yr history
Interest coverage -1.4x
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 MERCURY SYSTEMS INC a Hold rating, with a composite score of 53.9/100 and 3 out of 5 stars. Ranked #1406 of 7,333 stocks, MRCY 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 46/100, MRCY shows adequate but unremarkable business quality. The company reports a return on equity of -4.4% (sector avg: -2.5%), gross margins of 27.1% (sector avg: 42.5%), net margins of -7.2% (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.
MRCY's value score of 58/100 indicates the stock is fairly valued based on its current fundamentals. Key valuation metrics include an EV/EBITDA of 139.71x, a P/B ratio of 3.60x. At this level, neither a clear bargain nor overpriced, the stock's attractiveness depends more on forward growth expectations and qualitative factors.
MERCURY SYSTEMS INC's investment score of 27/100 suggests limited reinvestment activity. Key growth metrics include revenue growth of 13.9% vs. a sector average of 5.9% and a return on assets of -2.6% (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.
MRCY shows strong momentum characteristics with a score of 78/100. The stock has been trending above key moving averages, indicating solid demand from institutional buyers. Revenue growth stands at 13.9% year-over-year, while a beta of 0.79 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 62/100, MRCY exhibits average financial resilience. Key stability metrics include a beta of 0.79 and a debt-to-equity ratio of 71.00x (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.
The short interest score of 53/100 for MRCY suggests somewhat elevated bearish positioning by institutional traders. Specific risk factors include elevated leverage (D/E: 71.00x). With a $4.6B market cap (mid-cap), MERCURY SYSTEMS INC may experience above-average volatility. Investors should consider whether the short thesis has merit or if it creates a potential short-squeeze opportunity.
MERCURY SYSTEMS INC is a mid-cap company in the Manufacturing sector, ranked #0 of 50 in its sector (100th percentile) and #1406 of 7,333 overall (81st percentile). Key comparisons include ROE of -4.4% trailing the -2.5% sector median and operating margins of -5.6% below the 1.3% sector average. This top-quartile standing reflects exceptional competitive strength relative to Manufacturing peers.
While MRCY 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 (78) vs Investment (27) — closing this gap could shift the rating.
EV/EBITDA 1119% ABOVE SECTOR MEDIAN
ROE 78% ABOVE SECTOR MEDIAN (FAVORABLE)
Gross Margin 36% BELOW SECTOR MEDIAN
AUDIT DATA AS OF DEC 26, 2025 (Q3 FY2025)
We rate MERCURY SYSTEMS INC (MRCY) as a Hold with a composite score of 53.9/100 at a current price of $88.82. 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 (78th percentile) and stability (62th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (27th percentile) and quality (46th percentile) tempers our overall conviction. We assign a No Moat rating (30/100), Medium uncertainty, and Poor capital allocation.
Key items to watch: the path to profitability. 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.
MERCURY SYSTEMS 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 53.9/100 places it at rank #1406 in our full 7,333-stock universe. At $4.6B in market capitalization, MERCURY SYSTEMS INC is a mid-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.
The outlook is moderately positive, with revenue expanding at 14% and favorable momentum (78th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.
The margin cascade tells an important story: gross margins of 27% (-15.4pp vs sector) narrow to operating margins of -6% (-6.8pp vs sector) and net margins of -7.2%, yielding a gross-to-net conversion rate of -27%. 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 $88.82, MERCURY SYSTEMS INC is trading near fair value based on current fundamentals. Our value factor score of 58/100 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 EV/EBITDA of 139.7x (at a premium), P/B of 3.6x, P/S of 5.9x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.
Revenue growth of 14% confirms the business is expanding its addressable market — growth at this level typically supports multiple expansion and attracts institutional capital.
Positive momentum (78th percentile) indicates institutional accumulation and favorable technical dynamics that tend to persist in the intermediate term.
Thin net margins of -7.2% 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 Medium uncertainty rating to MERCURY SYSTEMS INC. The stock presents a balanced risk profile: current negative profitability (net margin -7.2%) and the combination of leverage (71% D/E) and thin margins (-7.2% net) amplifies downside risk. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.
Specific risk factors that inform our assessment include: current negative profitability (net margin -7.2%); the combination of leverage (71% D/E) and thin margins (-7.2% net) amplifies downside risk. 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 62th percentile and quality factor at the 46th percentile provide a quantitative summary of the overall risk landscape.
Key risk mitigants include: above-average stability (62th percentile) suggests predictable business dynamics. 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 MERCURY SYSTEMS INC's capital allocation as Poor. Key concerns include low returns on equity (-4.4%), negative profitability, weak asset returns (ROA -2.6%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — MERCURY SYSTEMS INC significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.
Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.
In summary, MERCURY SYSTEMS INC receives a Hold rating with a composite score of 53.9/100 (rank #1406 of 7,333). Our quantitative framework assigns a No Moat (30/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 54/100.
Our analysis supports a neutral stance on MERCURY SYSTEMS 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 MERCURY SYSTEMS INC a meaningful economic moat, scoring 30/100 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 8.9/20.
The strongest moat sources are growth durability (8.9/20) and margin superiority (7.8/20). Rev growth 14%, 11yr history. GM 27% vs sector 43%, OM -6% vs sector 1%. These pillars form the core of MERCURY SYSTEMS INC's competitive identity and are the primary drivers of excess returns in our framework.
Areas of relative weakness include reinvestment efficiency (2.2/20) and financial resilience (5.2/20). Capital turnover N/A, R&D intensity 6.2%. 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 MERCURY SYSTEMS INC's moat profile to remain largely unchanged absent a material shift in return on capital or industry dynamics.
Key profit drivers include moderate revenue growth of 14%. The margin cascade from 27% gross to -6% operating to -7.2% 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 46th percentile.
The margin profile shows gross margins of 27%, operating margins of -6%, net margins of -7.2%. Return metrics include ROE of -4.4% and ROA of -2.6%. Relative to the Manufacturing sector, gross margins are 15.4 percentage points below the sector median of 43%, and ROE of -4.4% compares to a sector median of -2.5%.
The balance sheet reflects moderate leverage with D/E of 71%, revenue growth of 14%. The sector median D/E is 0%, putting MERCURY SYSTEMS INC at higher leverage than the typical peer. Overall balance sheet health is adequate for the current business environment.
Above 50MA
37.18%
Net New Highs
+51081
Mercury Systems announced its Q2 earnings, surpassing analyst estimates. The company reported a year-over-year increase in revenues, indicating positive financial growth. This performance highlights a strong quarter for Mercury Systems.
Mercury Systems (MRCY) reported record first-half fiscal 2026 revenue of US$232.87 million, with a narrowed net loss of US$15.10 million. Despite these improvements and a US$200 million share repurchase program, the company still faces challenges including a low-margin backlog and modest revenue growth. Analysts have varying outlooks, with some more cautious about its long-term financial projections.
Mercury Systems' stock (NASDAQ:MRCY) appears to be overvalued by approximately 24% based on a Discounted Cash Flow (DCF) model, with a projected fair value of US$68.86 compared to its current share price of US$85.37. Although analysts have a higher price target of US$97.50, the DCF analysis suggests the company's valuation needs further scrutiny. Investors are encouraged to consider the company's financial health, future earnings, and other business fundamentals in addition to this DCF assessment.
Mercury Systems (MRCY) reported a Q2 2026 loss of US$15.1 million with revenue of US$232.9 million, continuing a trend of unprofitability despite revenue growth. The company's trailing twelve-month revenue is US$942.5 million, with a net loss of US$30.4 million. While forecasts project significant earnings growth and profitability within three years, the current valuation shows mixed signals with a P/S ratio above the industry average but below peers.
Mercury Systems' stock dropped 13% pre-market despite reporting an earnings beat, as investor concerns over declining margins and cautious guidance overshadowed the positive results. The market reacted negatively to the company's outlook, indicating that future profitability and growth prospects are a significant concern. This highlights a disconnect between reported earnings and market expectations for future performance.