Investment Thesis
Kratos demonstrates strong top-line growth of 18.5% YoY, but fundamental profitability is deteriorating with net income flat despite revenue expansion, indicating severe margin compression. Most critically, the company generated negative free cash flow of -$137.4M while burning operating cash, which is unsustainable and suggests poor earnings quality despite accounting profits.
Strengths
- Revenue growth of 18.5% YoY shows strong market demand in defense sector
- Zero long-term debt with $560.6M cash position provides financial flexibility
- Excellent liquidity with 4.06x current ratio and 3.82x quick ratio demonstrates short-term solvency
Risks
- Negative free cash flow of -$137.4M despite positive net income indicates severe cash generation problems and poor earnings quality
- Operating margins compressed to 1.9% and net margins at 1.6%, among the lowest in manufacturing; margin compression persists despite revenue growth
- Net income flat YoY (0.0% growth) while revenue grows 18.5% shows deteriorating profitability and return metrics (ROE 1.1%, ROA 0.9%) are critically weak
Key Metrics to Watch
- Operating cash flow and free cash flow trajectory toward positive generation
- Operating margin expansion as company scales revenue
- Return on equity and return on assets improvement from current depressed levels
Financial Metrics
Revenue
1.3B
Net Income
22.0M
EPS (Diluted)
$0.13
Free Cash Flow
-137.4M
Total Assets
2.5B
Cash
560.6M
Profitability Ratios
Gross Margin
22.9%
Operating Margin
1.9%
Net Margin
1.6%
ROE
1.1%
ROA
0.9%
FCF Margin
-10.2%
Balance Sheet & Liquidity
Current Ratio
4.06x
Quick Ratio
3.82x
Debt/Equity
0.00x
Debt/Assets
19.1%
Interest Coverage
2.67x
Long-term Debt
0.0
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-04-12T06:48:24.291595 |
Data as of: 2025-12-28 |
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