Kratos Defense: Buying a Pentagon Favourite at a Discount.

Summary 

• I am rating Kratos  a BUY because its key programs are positioned to benefit from the $156Bn defense funding package, with the company specifically citing hypersonics, Valkyrie CCA, solid rocket motors, drone engines, missiles and loitering munitions.

  
  

• Its growth is driven by a record  backlog, a 1.6x book to bill ratio and a $14.3 Bn. Together they point to sustained over 20% organic revenue growth through at least 2027, compounded by H2 2026 hardware deliveries on solid rocket motors and hypersonic propulsion systems that are already in production. 

  
  

• KTOS's multiple is elevated relative to peers but justified by its growth differential and the specificity of its DoD confirmed revenue pipeline. 

  
  

• The primary risks are DoD award timing lumpiness and execution on fixed price contracts absorbing inflation. Both are partially mitigated by the 72% funded backlog, a $1.46 Bn cash position with only $185 Mn in debt. 

The Kratos XQ-58 Valkyrie. Source: kratos

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