Kratos Defense & Security Solutions, Inc. (NASDAQ: KTOS)

Sector: Industrials Industry: Aerospace & Defense CIK: 0001069258
Market Cap 17.49 Bn
P/B 8.83
P/E 874.62
P/S 13.61
ROIC (Qtr) 0.68
Div Yield % 0.00
Rev 1y % (Qtr) 25.99
Total Debt (Qtr) 134.30 Mn
Debt/Equity (Qtr) 0.07

About

Price action

Investment thesis

Bull case

  • Healthy cash reserves of 565.90M provide 37.73x coverage of short-term debt 15M, demonstrating strong liquidity position and minimal refinancing risk.
  • Strong tangible asset base of 1.77B provides 13.19x coverage of total debt 134.30M, indicating robust asset backing and low credit risk.
  • Tangible assets of 1.77B provide exceptional 27.59x coverage of deferred revenue 64.20M, showing strong service capability backing.
  • Strong cash position of 565.90M provides 2.74x coverage of other current liabilities 206.20M, indicating excellent liquidity.
  • Cash reserves of 565.90M provide robust 1.97x coverage of current liabilities 287.40M, indicating strong short-term solvency.

Bear case

  • Operating cash flow of (8.60M) barely covers its investment activities of (84.70M), with a coverage ratio of 0.10, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Investment activities of (84.70M) provide weak support for R&D spending of 40.80M, which is -2.08x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Operating cash flow of (8.60M) provides insufficient coverage of deferred revenue obligations of 64.20M, which is -0.13x, raising concerns about future service delivery capabilities.
  • The company's operating cash flow of (8.60M) shows concerning coverage of stock compensation expenses of 33.20M, with a -0.26 ratio indicating potential earnings quality issues.
  • High receivables of 423.40M relative to inventory of 180M (2.35 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.

Geographical Breakdown of Revenue (2024)

Segments Breakdown of Revenue (2024)

Peer comparison

Companies in the Aerospace & Defense
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 GE General Electric Co 342.94 Bn 42.54 7.80 20.84 Bn
2 RTX RTX Corp 252.05 Bn 38.24 2.93 40.71 Bn
3 BA Boeing Co 174.43 Bn -17.16 2.16 53.35 Bn
4 LMT Lockheed Martin Corp 126.61 Bn 30.15 1.73 22.19 Bn
5 GD General Dynamics Corp 95.62 Bn 22.69 1.86 8.01 Bn
6 NOC Northrop Grumman Corp /De/ 89.30 Bn 22.22 2.18 16.96 Bn
7 HWM Howmet Aerospace Inc. 88.16 Bn 60.80 11.05 3.19 Bn
8 TDG TransDigm Group INC 80.97 Bn 43.39 9.17 30.02 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 7.01 3.58
EV to Cash from Ops. EV/CFO -1,975.35 58.38
EV to Debt EV to Debt 126.49 98.04
EV to EBIT EV/EBIT 516.35 19.42
EV to EBITDA EV/EBITDA 221.78 33.60
EV to Free Cash Flow [EV/FCF] EV/FCF -182.08 91.66
EV to Market Cap EV to Market Cap 0.97 1.13
EV to Revenue EV/Rev 13.22 11.27
Price to Book Value [P/B] P/B 8.83 4.81
Price to Earnings [P/E] P/E 874.62 31.79
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 -3.75
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 22.95
Dividend per Basic Share Div per Share (Qtr) 0.00 0.70
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 14.15
Interest Coverage Int. cover (Qtr) 4.70 -18.00
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -32.55 -50.32
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 87.69 1,609.43
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 0.75
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 33.46 -30.98
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -13.64 10.65
EBIT Growth (1y) % EBIT 1y % (Qtr) -4.91 -26.90
EBT Growth (1y) % EBT 1y % (Qtr) -3.72 -27.25
EPS Growth (1y) % EPS 1y % (Qtr) 30.00 -99.21
FCF Growth (1y) % FCF 1y % (Qtr) -1,327.63 6.61
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 1.73 -5.55
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.53 0.51
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.07
Cash Ratio Cash Ratio (Qtr) 1.97 1.76
Current Ratio Curr Ratio (Qtr) 4.30 3.72
Debt to Equity Ratio Debt/Equity (Qtr) 0.07 0.07
Interest Cover Ratio Int Coverage (Qtr) 4.70 -18.00
Times Interest Earned Times Interest Earned (Qtr) 4.70 -18.00
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 6.90 -345.84
EBIT Margin % EBIT Margin % (Qtr) 2.56 -382.63
EBT Margin % EBT Margin % (Qtr) 2.02 -387.93
Gross Margin % Gross Margin % (Qtr) 22.90 -33.31
Net Profit Margin % Net Margin % (Qtr) 1.60 -389.13