KTOS
Kratos Defense & Security Solutions, Inc.
$40.42
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 3433.2% above fair value
You pay
$40.42
Bear
$0.94
Fair
$1.14
Bull
$1.35
Bear
$0.94
-97.7%
$0.05 × 18x
Fair
$1.14
-97.2%
$0.05 × 22x
Bull
$1.35
-96.7%
$0.05 × 26x
Adjust Assumptions
22.0x
0.05$
Key Value Driver
Through-cycle normalized EPS ($0.05)
Implied Market Multiple
777.3x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (25 analysts)
$91.06
Divergence from AlphaVal
99%
Summary
Using 7-year normalized EPS of $0.05 at a 22x cycle multiple, the base-case value is $1.14 per share. P/TBV cross-check: 5.6x.
Warnings
Recent profits ($0.13/share) are 150% above the mid-cycle average ($0.05). Buying based on peak profits is the most common mistake with boom-and-bust businesses.
Price-to-book value of 5.6x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
Wall Street's average price target is $91.06 (from 25 analysts). Our estimate is 99% below the consensus -- consider that gap carefully.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing