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Should You Investigate Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) At US$19.41?

Simply Wall St

Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS), which is in the aerospace & defense business, and is based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Kratos Defense & Security Solutions’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Kratos Defense & Security Solutions

What is Kratos Defense & Security Solutions worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 10% below my intrinsic value, which means if you buy Kratos Defense & Security Solutions today, you’d be paying a fair price for it. And if you believe that the stock is really worth $21.61, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Kratos Defense & Security Solutions’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Kratos Defense & Security Solutions?

NasdaqGS:KTOS Past and Future Earnings, November 4th 2019

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Kratos Defense & Security Solutions’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in KTOS’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on KTOS, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Kratos Defense & Security Solutions. You can find everything you need to know about Kratos Defense & Security Solutions in the latest infographic research report. If you are no longer interested in Kratos Defense & Security Solutions, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.