• Wondering if Kratos Defense & Security Solutions at US$52.09 is still offering value after its run, or if risk is now catching up with the stock.
• The share price is up 48.3% over the past year and a very large amount over three years, even though it has fallen 8.6% over the past week, 26.6% over the past month, and 34.3% year to date.
• Recent coverage has focused on Kratos Defense & Security Solutions as an Aerospace & Defense contractor, with attention on how its contract pipeline and defense exposure fit into shifting government priorities. This context has helped frame the debate around whether the stock’s strong multi year performance still lines up with its fundamentals today.
• Despite that backdrop, Kratos Defense & Security Solutions currently holds a valuation score of 0 out of 6, so the next sections will walk through traditional valuation approaches before looking at a more complete way to judge what the stock might be worth.

Kratos Defense & Security Solutions scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Kratos Defense & Security Solutions Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a stock could be worth by projecting future cash flows and discounting them back to today’s value. For Kratos Defense & Security Solutions, the model used is a 2 Stage Free Cash Flow to Equity approach that focuses on free cash flow available to shareholders.

The latest twelve month free cash flow is a loss of about $124.6 million. Analyst and extrapolated projections in the model point to free cash flow of $85.9 million by 2028, with further estimates extending out to 2035, all in $. These future cash flows are discounted back to today and aggregated to reach an estimated intrinsic value of about $38.15 per share.

Compared with the current share price of $52.09, the DCF output implies the stock is about 36.6% above this intrinsic value. This suggests that Kratos may be trading on the expensive side based purely on these cash flow projections.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Kratos Defense & Security Solutions may be overvalued by 36.6%. Discover 51 high quality undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Kratos Defense & Security Solutions Price vs Sales

For companies where profitability may be limited or uneven, the P/S ratio is often more useful than P/E because it compares the stock price with revenue, which tends to be more stable than earnings. Investors usually expect higher P/S ratios when they see stronger growth potential and lower perceived risk, while slower growth or higher risk can justify a lower, more conservative P/S level.

Kratos Defense & Security Solutions currently trades on a P/S of 6.90x. That sits above both the Aerospace & Defense industry average of 4.94x and a peer average of 5.64x. Simply Wall St’s Fair Ratio framework estimates what a more tailored multiple could look like by factoring in elements such as the company’s growth profile, profit margins, industry, market cap and key risks. For Kratos, this Fair Ratio is 3.85x.

Because the Fair Ratio is designed to reflect company specific characteristics rather than broad peer groups, it can give a more precise signal than simple industry or peer comparisons. Here, Kratos’s current 6.90x P/S is well above the 3.85x Fair Ratio, which points to the stock trading on the expensive side using this metric.

Result: OVERVALUED

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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. Narratives on Simply Wall St let you attach your own story about Kratos Defense & Security Solutions to the numbers by linking what you think about its contracts, technology focus and risks to a specific forecast for revenue, earnings and margins. This then connects to a Fair Value that you can easily compare with the current price, with each Narrative living on the Community page and updating automatically when new news or earnings arrive. Narratives capture very different viewpoints in one place. For example, a bullish Kratos Narrative might see a Fair Value of about US$150 per share and expect earnings around US$224.0m by 2029, while a more cautious Kratos Narrative might anchor Fair Value closer to US$85 per share and earnings of about US$108.5m. This gives you a clear, side by side sense of how different assumptions translate into very different estimates of what the stock might be worth.

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!

This article by Simply Wall St is general in nature. We provide commentary based on historical data 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 financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.