Kratos Defense & Security Solutions (NASDAQ:KTOS) ascends 6.9% this week, taking one-year gains to 68%

If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. For example, the Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) share price is up 68% in the last 1 year, clearly besting the market return of around 34% (not including dividends). So that should have shareholders smiling. However, the stock hasn't done so well in the longer term, with the stock only up 12% in three years.

Since the stock has added US$242m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Kratos Defense & Security Solutions

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last year Kratos Defense & Security Solutions grew its earnings per share, moving from a loss to a profit.

The company was close to break-even last year, so earnings per share of US$0.065 isn't particularly stand out. But judging by the share price, the market is happy with the maiden profit. Inflection points like this can be a great time to take a closer look at a company.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on Kratos Defense & Security Solutions' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that Kratos Defense & Security Solutions shareholders have received a total shareholder return of 68% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 6% 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's always interesting to track share price performance over the longer term. But to understand Kratos Defense & Security Solutions better, we need to consider many other factors. Even so, be aware that Kratos Defense & Security Solutions is showing 1 warning sign in our investment analysis , you should know about...

Kratos Defense & Security Solutions is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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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.