Kratos Defense & Security Solutions (KTOS) Fundamental and Technical Analysis


Chart done on daily timeframe. Companies who land contracts with the U.S. Military often go on to enjoy an influx of revenue in the years to follow. Kratos Defense’s recent quarterly earnings reflected this by beating expectations on both revenue and profits. Looking back at their performance over the last several quarters, there’s definitely inconsistency in profitability, but revenue has mostly manage to grow steadily. The company’s balance sheet also reflects a healthy 3:1 ratio of assets to liabilities, but annual cash flow is still negative. We generally give companies with low/no free cash-flow a high risk rating just because it makes them vulnerable as a business to unexpected events, making KTOS a high risk short to medium term hold with close watch of profitability consistency and free cash flow in the coming years. 

Their most recent earnings helped boost the stock 15% higher, but the move came at a time when there was weakness in the market all around, which led the stock to retrace its move back down. The short term support to hold is around 15.00 to avoid a move to 13.90-14.50. Buyers want to see the stock back above 16.35 to start to regain some confidence, but the true breakout is 17.31.