Kratos Defense & Security Solutions (NASDAQ:KTOS) shareholders are up 6.3% this past week, but still in the red over the last year
The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) shareholders over the last year, as the share price declined 41%. That's well below the market decline of 10%. To make matters worse, the returns over three years have also been really disappointing (the share price is 33% lower than three years ago). Furthermore, it's down 29% in about a quarter. That's not much fun for holders. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
Although the past week has been more reassuring for shareholders, they're still in the red over the last year, so let's see if the underlying business has been responsible for the decline.
View our latest analysis for Kratos Defense & Security Solutions
Because Kratos Defense & Security Solutions made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last year Kratos Defense & Security Solutions saw its revenue grow by 5.3%. While that may seem decent it isn't great considering the company is still making a loss. Given this lacklustre revenue growth, the share price drop of 41% seems pretty appropriate. In a hot market it's easy to forget growth is the life-blood of a loss making company. So remember, if you buy a profitless company then you risk being a profitless investor.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
While the broader market lost about 10% in the twelve months, Kratos Defense & Security Solutions shareholders did even worse, losing 41%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 6% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Kratos Defense & Security Solutions .
Kratos Defense & Security Solutions is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
