Your Complete Kratos Defense Stock Checklist for Stock Analysis
Kratos Defense stock (ticker: KTOS) is a mid-cap U.S. defense contractor focused on unmanned systems, satellite communications, and high-value tactical weapon systems. The kratos defense stock analysis checklist below gives you a systematic way to evaluate whether the current price reflects the company's contract backlog and growth trajectory, or whether the market is pricing in assumptions that the fundamentals do not yet support.
This is not a buy recommendation. It is a structured framework so you can answer that question yourself.
Key Takeaways
- KTOS earns most of its revenue from U.S. government contracts, which means revenue is predictable but concentrated in a single customer.
- The company's unmanned aerial vehicle (UAV) programs, particularly the XQ-58A Valkyrie, are strategically differentiated in a growing DoD budget segment.
- Kratos trades at an elevated forward P/E relative to most defense peers, reflecting growth expectations rather than current earnings power.
- Free cash flow has been negative in several recent years due to heavy R&D investment; investors must decide whether the reinvestment thesis holds.
- The VMCI Score framework at ValueMarkers weights Quality (30%) and Growth (12%) heavily for companies in this investment profile.
- Contract backlog and book-to-bill ratio are the two most important data points to verify each quarter.
Step 1: Understand What Kratos Defense Actually Does
Before you look at a single ratio, confirm what the company is selling and to whom.
Kratos operates across three main segments: Unmanned Systems (drone technology, including the Valkyrie and its tactical drone portfolio), Government Solutions (satellite communications, microwave electronics, missile defense infrastructure), and Training and Service.
The UAV segment is the growth engine. The U.S. Air Force's requirement for affordable, attritable drones, aircraft designed to accept loss in combat, places Kratos directly in a DoD spending priority. Check the most recent 10-K for segment revenue mix and confirm that Unmanned Systems is growing faster than the legacy Government Solutions segment.
Step 2: Valuation Check on Kratos Defense Stock
Kratos does not fit a traditional value screen. The company reinvests aggressively, which depresses near-term earnings. You need to evaluate it on revenue growth and EV/Revenue rather than trailing P/E.
| Metric | Kratos (KTOS) | Defense Sector Median |
|---|---|---|
| Forward P/E | ~55x | ~18x |
| EV/Revenue | ~3.5x | ~1.8x |
| EV/EBITDA | ~35x | ~14x |
| Revenue Growth (3yr CAGR) | ~10% | ~4% |
| Gross Margin | ~26% | ~20% |
| Free Cash Flow Margin | ~2-4% | ~8% |
The valuation premium is real. It is only justified if the company delivers on its next-generation drone programs at scale. Run the EV/Revenue comparison through our screener against peers like L3Harris, SAIC, and TransDigm to calibrate where Kratos sits on the premium-to-growth spectrum.
Step 3: Contract Backlog and Revenue Visibility
Government defense contractors live and die by their funded backlog. Check two numbers from the most recent earnings release.
First, total backlog in dollars. Kratos has historically carried a backlog of $900 million to $1.1 billion. If backlog is declining, the growth story has a problem.
Second, book-to-bill ratio. A ratio above 1.0 means the company is winning more contracts than it is delivering. A ratio below 1.0 means it is drawing down existing commitments without replacing them. Sustained book-to-bill above 1.0 over six or more quarters is the clearest sign that demand is real.
Step 4: Balance Sheet and Dilution Risk
Kratos has funded its growth partly through equity issuance. Check the share count in each annual filing. If shares outstanding have grown faster than revenue, each existing shareholder owns a shrinking piece of a growing business.
Also check the debt load. Kratos carries long-term debt in the $400 million to $500 million range. At current EBITDA levels, net debt to EBITDA sits above 3x in most recent periods. That is elevated but manageable if contract wins continue. If they slow, refinancing pressure becomes real.
Step 5: Management Quality and Capital Allocation
The CEO, Eric DeMarco, has run Kratos since 2012. He transformed the company from a general IT services firm into a focused defense technology business. That focus is an asset. The track record on capital allocation is mixed, with acquisitions sometimes adding dilution before adding earnings.
Check whether the company is generating return on invested capital (ROIC) above its cost of capital. At the current reinvestment phase, ROIC will look low. The question is whether the trajectory is improving. Apple's ROIC of 45.1% illustrates what a mature, capital-light business looks like. Kratos is not there yet, but the relevant check is directional improvement, not current level.
Step 6: Competitive Position in Drone Systems
The DoD's Collaborative Combat Aircraft (CCA) program is the largest near-term prize in the UAV market. Boeing and Northrop Grumman also compete, but Kratos's cost advantage in affordable attritable systems is a real differentiator.
Check whether Kratos has received CCA Phase 2 contract awards. A contract win at this stage would be a major catalyst. An exclusion would force a reassessment of the growth multiple.
Step 7: Run the Full VMCI Screen
The ValueMarkers Composite Indicator (VMCI) weights Value (35%), Quality (30%), Integrity (15%), Growth (12%), and Risk (8%). For Kratos, the Value pillar will score low given the premium multiple. The Quality pillar depends on consistent revenue growth and improving margins. The Integrity pillar checks for earnings quality and insider alignment.
Run KTOS through the full screener to see where it ranks inside the defense sector. Compare to the sector average on each pillar. The Risk pillar will flag customer concentration, which is the key structural risk for any single-client defense contractor.
Further reading: SEC EDGAR · FRED Economic Data
Why kratos defense analysis Matters
This section anchors the discussion on kratos defense analysis. The detailed treatment, formula, and worked examples appear in the body of this article above. The points below summarize the most important takeaways for value investors who want to apply kratos defense analysis in real portfolio decisions. ValueMarkers exposes the underlying data on every covered ticker via the screener and stock profile pages, so the concepts in this article translate directly into actionable filters.
Key inputs for kratos defense analysis
See the main discussion of kratos defense analysis in the sections above for the full treatment, including the inputs, the calculation methodology, the typical sector benchmarks, and the most common pitfalls to avoid. The ValueMarkers screener lets value investors filter the full universe of 100,000+ stocks across 73 exchanges using kratos defense analysis alongside the rest of the 120-indicator composite, with sector percentiles and historical trends shown on every stock profile.
Sector benchmarks for kratos defense analysis
See the main discussion of kratos defense analysis in the sections above for the full treatment, including the inputs, the calculation methodology, the typical sector benchmarks, and the most common pitfalls to avoid. The ValueMarkers screener lets value investors filter the full universe of 100,000+ stocks across 73 exchanges using kratos defense analysis alongside the rest of the 120-indicator composite, with sector percentiles and historical trends shown on every stock profile.
Related ValueMarkers Resources
- Pe Ratio — Glossary entry for Pe Ratio
- Forward Pe — Glossary entry for Forward Pe
- Enterprise Value to Revenue (EV/Revenue) — Enterprise Value to Revenue is the metric used to how cheaply a stock trades relative to its fundamentals
- Defense Stock Analysis — related ValueMarkers analysis
- Aerospace Defense Sector Guide — related ValueMarkers analysis
- Doordash Earnings Revenue Growth — related ValueMarkers analysis
Frequently Asked Questions
what happens if the stock market crashes
In a broad market crash, Kratos defense stock would likely fall with the market in the short term, as most stocks do during forced selling. However, defense contractors with active government contracts tend to recover faster than cyclical sectors because their revenue is funded by congressional appropriations, which continue through recessions. KTOS specifically would be exposed to any reduction in DoD drone procurement budgets, which historically only cuts in severe multi-year fiscal contractions.
what time does the stock market open
The U.S. stock market opens at 9:30 a.m. Eastern Time on weekdays. Pre-market trading on major platforms typically runs from 4:00 a.m. to 9:30 a.m. Eastern, and after-hours trading runs from 4:00 p.m. to 8:00 p.m. Eastern. Kratos defense stock trades on Nasdaq under the ticker KTOS during all of these sessions.
are stock markets closed today
U.S. stock markets close on all federal holidays, including New Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Juneteenth, Independence Day, Labor Day, Thanksgiving, and Christmas. On those days you cannot execute trades during regular market hours, though some pre-market and after-hours activity may occur on certain platforms.
what time does the stock market close
The U.S. stock market closes at 4:00 p.m. Eastern Time on standard trading days. Some brokerage platforms offer after-hours trading until 8:00 p.m. Eastern. Earnings releases for Kratos and other defense companies often come out after the 4:00 p.m. close, meaning initial price reactions show in the after-hours session before the next regular trading day.
when does the stock market open
The New York Stock Exchange and Nasdaq both open at 9:30 a.m. Eastern Time, Monday through Friday, excluding federal holidays. Pre-market sessions begin as early as 4:00 a.m. Eastern on most major platforms. For defense stocks like KTOS, significant price moves often occur pre-market after government contract announcements.
why is the stock market down today
The stock market falls on any given day for a range of reasons: Federal Reserve interest rate signals, weaker-than-expected economic data, corporate earnings misses, geopolitical escalation, or broad risk-off sentiment. For Kratos defense stock specifically, a down day can also reflect DoD budget news, contract award delays, or competitor wins on programs KTOS was expected to lead. Check the defense budget news alongside any macro event before assuming the cause.
Use our screener to run Kratos defense stock against every metric in this checklist in one place. Filter by sector, sort by forward P/E and EV/Revenue, and compare KTOS to its direct peer group before you decide.
Written by Javier Sanz, Founder of ValueMarkers. Last updated April 2026.
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Disclaimer: This content is for informational and educational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security. Past performance does not guarantee future results. Consult a licensed financial advisor before making investment decisions.