Evaluation of Defense sector stock: KTOS
While doing my do diligence (re:RTN) I came upon this stock, since what I really want is defense exposure. KTOS has had a historically bumpy price, from $2 to $1,438 (you read that right), possibly because it is both a defense and a tech stock (the high price was during the dotcom era). At the point of this review, they were just awarded a Marine contract, acquired Gichner (tactical & military shelter manufacture), an Army Research contract, and Naval surface warfare support services.
Price/Earnings (TTM) . . . . . . 11.11x
Price/Sales (TTM) . . . . . . . . 0.46x
Price/Book (MRQ) . . . . . . . . 1.09x
Price/Cash Flow (TTM) . . . . . 6.17x
From Reuters:
Essentially their stock has gone up because they've been awarded another government contract. Since they don't really have a back log of clients, they will go down again within a year if they can't secure another large contract. However, as they're trading at 1.09x book I think this is a pretty simple pick up. If you pick up the stock around 8.50 to 10.00 it will trade higher than that. When and if you bale will be determined by their ability to secure additional contracts. If they secure no additional contracts you sell around November to February, and if they manage to drum out additional contacts you hold until those aren't providing additional revenue.
While this stock won't go to zero, it's a little more risky long term, since anyone can provide software solutions and (in fact) many companies do. I simply like KTOS because of their attractive price, decent fundamentals, and break out odds (chance that their stock evaluation will take a marked positive turn). Therefore I will probably pick this up as a trade and hold onto it as long as it treats me right. If you care to roll the dice that they'll be improving their offerings, gaining additional market advantage, and have 5 years to park your money in one place, KTOS could offer a very strong return in 10 to 15 years . . . if they can keep a steady stream of clients.
While doing my do diligence (re:RTN) I came upon this stock, since what I really want is defense exposure. KTOS has had a historically bumpy price, from $2 to $1,438 (you read that right), possibly because it is both a defense and a tech stock (the high price was during the dotcom era). At the point of this review, they were just awarded a Marine contract, acquired Gichner (tactical & military shelter manufacture), an Army Research contract, and Naval surface warfare support services.
Price/Earnings (TTM) . . . . . . 11.11x
Price/Sales (TTM) . . . . . . . . 0.46x
Price/Book (MRQ) . . . . . . . . 1.09x
Price/Cash Flow (TTM) . . . . . 6.17x
From Reuters:
Kratos Defense & Security Solutions, Inc. (Kratos) is engaged in providing mission critical engineering, information technology (IT) services and war fighter solutions. It works primarily for the United States Government and federal government agencies, but it also performs work for state and local agencies, and commercial customers. Its principle services are related to, but are not limited to, command, control, communications, computing, combat systems, intelligence, surveillance and reconnaissance (C4ISR); weapons systems lifecycle support and sustainment, military weapon range operations and technical services; missile, rocket and weapons system test and evaluation; missile and rocket mission launch services; public safety, security and surveillance systems; modeling and simulation; unmanned aerial vehicle (UAV) products and technology; advanced network engineering and IT services. It operates in two segments: Kratos Government Solutions (KGS) and Public Safety and Security (PSS).Beyond the standard defense play they have growth potential since they are such a small company. They may be able to achieve competitive growth by offering some of their more specialize offerings which are predominantly infrastructure solutions for government agencies and militaries as well as weapon operational solutions (Army Logistics, Missile defense data management, Weapon system training & testing, Weapon system maintenance).
Essentially their stock has gone up because they've been awarded another government contract. Since they don't really have a back log of clients, they will go down again within a year if they can't secure another large contract. However, as they're trading at 1.09x book I think this is a pretty simple pick up. If you pick up the stock around 8.50 to 10.00 it will trade higher than that. When and if you bale will be determined by their ability to secure additional contracts. If they secure no additional contracts you sell around November to February, and if they manage to drum out additional contacts you hold until those aren't providing additional revenue.
While this stock won't go to zero, it's a little more risky long term, since anyone can provide software solutions and (in fact) many companies do. I simply like KTOS because of their attractive price, decent fundamentals, and break out odds (chance that their stock evaluation will take a marked positive turn). Therefore I will probably pick this up as a trade and hold onto it as long as it treats me right. If you care to roll the dice that they'll be improving their offerings, gaining additional market advantage, and have 5 years to park your money in one place, KTOS could offer a very strong return in 10 to 15 years . . . if they can keep a steady stream of clients.
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