KTOS
Kratos Defense & Security Solutions, Inc.
$56.18
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 74.9% above fair value
You pay
$56.18
Bear
$28.13
Fair
$32.11
Bull
$36.04
Bear
$28.13
-49.9%
$0.19 × 18x + net cash
Fair
$32.11
-42.8%
$0.19 × 22x + net cash
Bull
$36.04
-35.8%
$0.19 × 26x + net cash
Key Value Driver
Through-cycle normalized EPS ($0.19)
Implied Market Multiple
290.6x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $109.58 from 24 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $32.11 per share.
Warnings
Price-to-book value of 7.8x 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 $109.58 (from 24 analysts). Our estimate is 94% 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