Has Kratos Soared Too Far After 245% Rally in 2025?

• Wondering if Kratos Defense & Security Solutions could be an undervalued gem or if the recent hype has stretched its price? You are not alone; a lot of investors are asking the same thing right now.
• Kratos shares have delivered a powerful rally this year, soaring 245.8% year-to-date and an eye-popping 286.6% over the past 12 months, with a strong 8.2% gain just in the last week.
• Shares have surged as investors react to growing interest in defense and security spending, bolstered by ongoing global tensions and an increased focus on advanced military technologies. This tailwind has fueled impressive returns for the stock as the market reassesses its long-term growth prospects.
• Despite all this excitement, Kratos scores just 0/6 on our undervaluation checks, so let us dig into the different ways investors are thinking about value. Stay tuned for a more insightful twist on valuation later in the article.

Kratos Defense & Security Solutions scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Kratos Defense & Security Solutions Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model values a company by projecting its future cash flows and discounting them back to today’s value. The idea is to estimate how much cash the business will generate in the future and determine what that is worth in today’s dollars.

For Kratos Defense & Security Solutions, the DCF analysis uses a 2 Stage Free Cash Flow to Equity model. Current free cash flow is negative, at $-54.2 million, reflecting ongoing heavy investments in growth. Analysts expect free cash flow to become positive over time, with projections reaching $108.3 million by 2035. Estimates are provided directly from analysts for the first five years, and then Simply Wall St extrapolates them for the next five years.

Despite these optimistic projections, the DCF model estimates the fair value of Kratos’s shares at $8.83 each. Compared to the current share price, the model suggests that the stock is 933.0% overvalued.

If you are searching for a bargain, this analysis indicates Kratos shares are priced far above what its future cash flows would justify.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Kratos Defense & Security Solutions may be overvalued by 933.0%. Discover 848 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Kratos Defense & Security Solutions.

Approach 2: Kratos Defense & Security Solutions Price vs Sales

The Price-to-Sales (P/S) ratio is often favored for valuing companies like Kratos Defense & Security Solutions, particularly when profits are inconsistent or still developing. This metric compares a company’s market value to its sales, offering a clear picture for businesses that are growing quickly or reinvesting heavily for future gains.

The "right" P/S ratio for a stock is influenced by factors such as growth expectations and business risks. High-growth companies with perceived safer prospects can command higher multiples. Those facing slowdowns or higher uncertainty typically trade at lower P/S ratios.

Currently, Kratos trades at a P/S ratio of 12.7x. This is substantially higher than the Aerospace & Defense industry average of 3.10x and the peer average of 4.51x. However, raw comparisons can be misleading because they ignore company-specific factors.

This is where Simply Wall St’s proprietary “Fair Ratio” comes in. It combines elements like earnings growth estimates, profit margins, market cap, company-specific risks, and industry dynamics to determine what a rational multiple should be for Kratos specifically. For Kratos, the Fair Ratio is calculated as 2.62x, which is considerably below the current 12.7x multiple.

That gap suggests Kratos shares are trading at a rich premium to what the underlying business characteristics would justify, even after adjusting for its growth outlook and market position.

Result: OVERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1387 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Kratos Defense & Security Solutions Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a simple and actionable way to express your personal perspective on a company by linking its story and future outlook to an explicit financial forecast and an estimated fair value.

Rather than relying on just a single model or analyst opinion, Narratives help you clarify what you believe about the business, from how fast revenue will grow, to what margins it could achieve, and what risks matter most. You can then calculate what that means for fair value. This approach bridges the gap between stories and numbers, making it easier to decide whether to buy, sell, or hold based on the difference between your Fair Value and today’s price.

Narratives are available right now on Simply Wall St’s Community page, making it accessible for anyone to build and share their own investment case, just like millions of investors already do. Best of all, they update dynamically as new earnings announcements, news, or market moves come in, so your scenario always reflects the latest information.

For example, different investors looking at Kratos Defense & Security Solutions may have sharply different Narratives. One might see a fair value as high as $93 per share due to ongoing contract wins and rapid defense expansion, while another could see it as low as $60 if they are concerned about cash flow risk and delayed contract execution.

Do you think there's more to the story for Kratos Defense & Security Solutions? Head over to our Community to see what others are saying!

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.