Stock Analysis

Kratos Defense & Security Solutions, Inc.'s (NASDAQ:KTOS) latest 9.6% decline adds to one-year losses, institutional investors may consider drastic measures

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NasdaqGS:KTOS
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A look at the shareholders of Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) can tell us which group is most powerful. With 82% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$1.4b last week after a 9.6% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 52% might not go down well especially with this category of shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. Hence, if weakness in Kratos Defense & Security Solutions' share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about Kratos Defense & Security Solutions.

If you're not interested in researching KTOS's ownership structure, we have a free list of interesting investing ideas to potentially inspire your next investment!

ownership-breakdown
NasdaqGS:KTOS Ownership Breakdown September 29th 2022

What Does The Institutional Ownership Tell Us About Kratos Defense & Security Solutions?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors have a fair amount of stake in Kratos Defense & Security Solutions. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Kratos Defense & Security Solutions' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NasdaqGS:KTOS Earnings and Revenue Growth September 29th 2022

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Kratos Defense & Security Solutions is not owned by hedge funds. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 9.0%. BlackRock, Inc. is the second largest shareholder owning 8.0% of common stock, and ARK Investment Management LLC holds about 6.5% of the company stock. Additionally, the company's CEO Eric DeMarco directly holds 0.5% of the total shares outstanding.

After doing some more digging, we found that the top 14 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Kratos Defense & Security Solutions

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Shareholders would probably be interested to learn that insiders own shares in Kratos Defense & Security Solutions, Inc.. The insiders have a meaningful stake worth US$27m. Most would see this as a real positive. It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 16% stake in Kratos Defense & Security Solutions. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Kratos Defense & Security Solutions better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

Valuation is complex, but we're helping make it simple.

Find out whether Kratos Defense & Security Solutions is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About NasdaqGS:KTOS

Kratos Defense & Security Solutions

Kratos Defense & Security Solutions, Inc.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation1
Future Growth4
Past Performance0
Financial Health4
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Adequate balance sheet with reasonable growth potential.