After a new war broke out between the U.S. and Israel on one side and Iran on the other, Kratos stock looks worth buying for short-term investors. However, given the name’s high valuation and the high odds of the stock falling after the conflict ends, medium-to-long term investors should avoid the stock at this point, despite the company’s generally impressive fourth-quarter results and strong outlook.
KTOS Stock Rallied in the Aftermath of America’s Invasion of Venezuela and Then Tumbled
The U.S. invaded Venezuela on January 3. KTOS stock closed at $79.29 on January 2 and advanced all the way to $130.72 as of the market close on January 16. But as of the market close on February 5, the name had sunk to $85.25.
Although of course history doesn’t always repeat itself, there’s a very good chance that the shares will climb and then fall following the recent American/Israeli attacks on Iran.
Kratos’ Overall Longer-Term Fundamental Outlook Is Excellent
Boding very well for the longer-term outlook of KTOS stock, the firm continues to obtain many impressive, major deals. Most momentously, the U.S. Marines made the firm’s Valkyrie drone “a program of record,” and on the company’s fourth-quarter earnings call, held on February 23, CEO Eric DeMarco reported that Valkyrie had received another “program of record” deal within the U.S.
The CEO added that “I believe that we are in a sole source position for two additional tactical drone opportunities” in late 2026. Further, Kratos’ partner, Northrop Grumman (NOC) obtained an MUX TACAIR Collaborative Combat Aircraft deal that will be fulfilled using Kratos’ aircraft and NOC’s “mission systems,” DeMarco stated, adding that the agreement is expected to generate about $115 million of revenue for Kratos over roughly two years.
Additionally, the firm has received orders for 120 of its solid rocket motors, and the Pentagon chose Kratos ” to develop highly maneuverable Mach 5-plus hypersonic missiles, including advancing in-flight steering and propulsion systems,” DeMarco reported, adding that the company expects the revenue of its hypersonic business to reach about $400 million this year and potentially $700 million in 2027, up from about $200 million in 2025.
Finally, as I noted in my previous column on KTOS stock, the company won a contract that could be worth as much as $175 million to provide systems for the Navy, and it’s working on “a “military grade hardware and system program” that may bring it as much as $750 million.
Also leaving the company well-positioned to deliver strong financial results over the longer term are its backlog of $1.57 billion, representing an all-time high, and its commendable book-to-bill ratio of 1.3 to 1.
Excellent Q4 Results But a High Valuation
Last quarter, Kratos’ Q4 revenue climbed 20% versus the same period a year earlier to $345.1 million, while its net income came in at $5.9 million, up from $3.9 million in Q4 of 2024. Even more impressively, Kratos’ operating income surged to $8.2 million from $3 million. And for 2026, KTOS expects its operating income to soar to $55 million to $60 million, versus just $25.6 million in 2025.
Despite the retreat of KTOS stock in the weeks following the invasion of Venezuela, the shares are still changing hands at a very high forward price-earnings ratio of 167 times. And that ratio is likely to get even steeper as the war against Iran continues.
The Bottom Line on KTOS Stock
Although the company’s fundamental outlook is remarkably strong, its valuation is very high and likely to keep climbing in the short term. So while the name looks appealing for short-term investors, those with a longer time horizon should wait for the decline of the stock price that will probably occur after the war ends.
*This article is intended to be informational only; it is not financial advice.
