Is It Too Late To Consider Buying Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS)?

By
Simply Wall St
Published
August 30, 2021
NasdaqGS:KTOS
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Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS), might not be a large cap stock, but it saw a decent share price growth in the teens level on the NASDAQGS over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Kratos Defense & Security Solutions’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Kratos Defense & Security Solutions

Is Kratos Defense & Security Solutions still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 11% below my intrinsic value, which means if you buy Kratos Defense & Security Solutions today, you’d be paying a fair price for it. And if you believe the company’s true value is $27.88, then there’s not much of an upside to gain from mispricing. What's more, Kratos Defense & Security Solutions’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will Kratos Defense & Security Solutions generate?

earnings-and-revenue-growth
NasdaqGS:KTOS Earnings and Revenue Growth August 30th 2021

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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Kratos Defense & Security Solutions, at least in the near future.

What this means for you:

Are you a shareholder? Currently, KTOS appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on KTOS for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on KTOS should the price fluctuate below its true value.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 1 warning sign for Kratos Defense & Security Solutions you should be aware of.

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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.
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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.