Is Kratos Defense & Security Solutions, Inc. overvalued or undervalued?

As of 17 October 2025, the valuation grade for Kratos Defense & Security Solutions, Inc. has moved from expensive to attractive, indicating a shift towards a more favorable assessment. The company appears to be undervalued, particularly when considering its P/E ratio of 267, which is significantly higher than peers like Leonardo DRS, Inc. with a P/E of 43.14 and Crane Co. at 35.01. Additionally, the EV to EBITDA ratio stands at 71.72, compared to the industry average, suggesting a premium valuation relative to its earnings potential.
In comparison to its peers, Kratos shows a PEG ratio of 2.98, which is less favorable than AeroVironment, Inc. with a PEG of 180.12, indicating that while Kratos is currently attractive, its growth may not be as robust as some competitors. The recent stock performance shows that Kratos has outperformed the S&P 500 significantly over the YTD and 1Y periods, with returns of 215.09% and 229.58%, respectively, compared to the S&P 500's 13.30% and 14.08%. This strong performance reinforces the notion that the stock may be undervalued relative to its growth potential.