Kratos & The Peculiar Dance of Dollars

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Now, it seems Kratos Defense & Security (KTOS 5.48%) took a bit of a tumble yesterday – a seven-and-a-half percent dip, if you please – despite, and this is the curious part, reporting numbers that, on the surface, didn’t seem to warrant such a fuss. Folks are always quick to run for cover, aren’t they? Like a flock of geese before a thunderstorm.

The soothsayers – or ‘analysts,’ as they prefer to be called – predicted a paltry penny and change per share, with sales amounting to $327.6 million. Kratos, however, came in with eighteen cents a share and $345.1 million in sales. A victory, you’d think? Well, hold your horses.

A Mixed Bag, Indeed

The company’s performance, it appears, was a bit like a patchwork quilt – some fine stitching, some rather frayed edges. Sales did grow a respectable 22% year over year, which is a good sign, I suppose. But the profits? Flat as a pancake. They boasted about eighteen cents a share, but that was a “non-GAAP” number, a bit of accounting sleight of hand, if you ask me. The real earnings, calculated the honest way, were a mere three cents. A penny saved, as they say, is a penny earned, but three cents doesn’t buy much these days.

The drone business, which is what most folks associate with Kratos, only managed a 12% increase. Most of the growth came from their “KGS” division – rockets, microwaves, and all manner of futuristic gadgets. Seems they’re hedging their bets, spreading their investments like butter on toast.

And the cash flow? Well, it ran negative, a rather substantial $137.4 million for the quarter. They claim it’s $125.4 million, but numbers have a way of shifting, don’t they? It’s like trying to nail jelly to a tree.

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A Penny Wise or a Pound Foolish?

Now, there was some good news, I’ll grant you that. Sales growth was strong overall, and the KGS division was particularly robust. Full-year sales grew 17%, which isn’t anything to sneeze at. They also boast a book-to-bill ratio of 1.1 for the year, improving to 1.3 in the final quarter. This suggests future sales are looking promising, with projections of $1.6 to $1.7 billion in 2026 – a 21% growth, they claim. A grand ambition, indeed.

But here’s the rub, and it’s a considerable one. This company is trading at 730 times its earnings! Goodness gracious. It reminds me of a fellow I once knew who paid a king’s ransom for a mule that couldn’t pull a feather. A handsome mule, mind you, but utterly useless. I just can’t recommend buying a stock at such a price. It’s a sell, plain and simple. There are plenty of other fish in the sea, and some of them are a good deal cheaper.

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2026-02-24 19:12