At US$27.37, Is It Time To Put Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) On Your Watch List?

Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS), is not the largest company out there, but it saw a significant share price rise of 30% in the past couple of months on the NASDAQGS. The company's trading levels have reached its high for the past year, following the recent bounce in the share price. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Kratos Defense & Security Solutions’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Kratos Defense & Security Solutions

Is Kratos Defense & Security Solutions Still Cheap?

According to our valuation model, the stock is currently overvalued by about 37%, trading at US$27.37 compared to our intrinsic value of $19.98. Not the best news for investors looking to buy! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Kratos Defense & Security Solutions’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Kratos Defense & Security Solutions look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to more than double over the next couple of years, the future seems bright for Kratos Defense & Security Solutions. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in KTOS’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe KTOS should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on KTOS for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for KTOS, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Kratos Defense & Security Solutions at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Kratos Defense & Security Solutions.

If you are no longer interested in Kratos Defense & Security Solutions, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.