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After Leaping 29% Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) Shares Are Not Flying Under The Radar

Simply Wall St · 03/25/2025 10:00

Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) shares have had a really impressive month, gaining 29% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 83%.

After such a large jump in price, given around half the companies in the United States' Aerospace & Defense industry have price-to-sales ratios (or "P/S") below 2.3x, you may consider Kratos Defense & Security Solutions as a stock to avoid entirely with its 4.4x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Kratos Defense & Security Solutions

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NasdaqGS:KTOS Price to Sales Ratio vs Industry March 25th 2025

What Does Kratos Defense & Security Solutions' Recent Performance Look Like?

Kratos Defense & Security Solutions could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is high because investors think this lacklustre revenue performance will improve markedly. If not, then existing shareholders may be very nervous about the viability of the share price.

Keen to find out how analysts think Kratos Defense & Security Solutions' future stacks up against the industry? In that case, our free report is a great place to start.

How Is Kratos Defense & Security Solutions' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Kratos Defense & Security Solutions' is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered a decent 9.6% gain to the company's revenues. Pleasingly, revenue has also lifted 40% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next three years should generate growth of 13% per annum as estimated by the twelve analysts watching the company. With the industry only predicted to deliver 7.8% per annum, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Kratos Defense & Security Solutions' P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Kratos Defense & Security Solutions' P/S Mean For Investors?

Kratos Defense & Security Solutions' P/S has grown nicely over the last month thanks to a handy boost in the share price. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As we suspected, our examination of Kratos Defense & Security Solutions' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Kratos Defense & Security Solutions that you should be aware of.

If these risks are making you reconsider your opinion on Kratos Defense & Security Solutions, explore our interactive list of high quality stocks to get an idea of what else is out there.