While Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) might not have the largest market cap around , it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. The company is now trading at yearly-high levels following the recent surge in its share price. 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. But what if there is still an opportunity to buy? Let’s examine Kratos Defense & Security Solutions’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for Kratos Defense & Security Solutions
The stock is currently trading at US$27.37 on the share market, which means it is overvalued by 37% compared to our intrinsic value of $19.98. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Since Kratos Defense & Security Solutions’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. With profit expected to more than double over the next couple of years, the future seems bright for Kratos Defense & Security Solutions. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
Are you a shareholder? It seems like the market has well and truly priced in KTOS’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe KTOS should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on KTOS for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for KTOS, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
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