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. The company appears to be undervalued, particularly when considering its high P/E ratio of 267, a Price to Book Value of 4.48, and an EV to EBITDA of 71.72. In comparison to peers, Kratos has a significantly higher P/E ratio than AeroVironment, Inc. at 180.12 and Leonardo DRS, Inc. at 43.14, indicating a potential mispricing relative to its industry.
Despite the current undervaluation, Kratos has shown impressive returns, with a year-to-date return of 215.09% compared to the S&P 500's 13.30%, and a three-year return of 732.87% versus the S&P 500's 81.19%. This performance reinforces the attractiveness of the stock, suggesting that the market may be underestimating its growth potential.