Generally speaking, investors are inspired to be stock pickers by the potential to find the big winners. But when you hold the right stock for the right time period, the rewards can be truly huge. For example, the Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) share price is up a whopping 344% in the last three years, a handsome return for long term holders. It’s also good to see the share price up 29% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.
Given that Kratos Defense & Security Solutions only made minimal earnings in the last twelve months, we’ll focus on revenue to gauge its business development. As a general rule, if the market is looking past earnings to focus on revenue, there is a hope for, or expectation of, strong growth. That’s because it’s hard for shareholders to have confidence a company will grow profits significantly if it isn’t growing revenue.
Over the last three years Kratos Defense & Security Solutions has grown its revenue at 3.9% annually. That’s not a very high growth rate considering it doesn’t make profits. Therefore, we’re a little surprised to see the share price gain has been so strong, at 64% per year, compound, over three years. A win is a win, even if the revenue growth doesn’t really explain it, in our view). Shareholders would want to be sure that the share price rise is sustainable.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Kratos Defense & Security Solutions stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
It’s nice to see that Kratos Defense & Security Solutions shareholders have received a total shareholder return of 50% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 16% per year), it would seem that the stock’s performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.