KTOS Stock Rises 17.7% in 3 Months: Worth Including in Your Portfolio?

Kratos Defense & Security Solutions, Inc. KTOS shares have rallied 17.7% in the past three months compared with the Zacks Aerospace-Defense Equipment industry’s growth of 11.1%. Kratos Defense remains the U.S. Army’s primary unmanned aerial target drone provider, with its growth prospects backed by America’s stable funding provisions.
 

Other defense equipment stocks, such as Curtiss-Wright CW and HEICO Corporation HEI, have also risen in the past three months. Shares of Curtiss-Wright and HEICO have gained 7.4% and 1.5%, respectively, during the time frame.

Considering Kratos Defense’s outperformance relative to its industry, investors may be wondering whether now is a good time to add KTOS stock to their portfolios. Let’s examine the factors that contributed to the share price gain and assess the stock’s investment prospects to make an informed decision.

Factors Acting in Favor of KTOS Stock

Kratos Defense is one of the leading providers of unmanned aerial target drones for U.S. and allied militaries, with its strong reputation and proven technology driving consistent contract wins, strategic partnerships, global expansion and long-term competitiveness.

In February 2026, Kratos Defense was awarded contracts totaling nearly $65 million to design, develop and deliver simulators and other solutions for warfighter training, supporting the operations and maintenance of key aircraft and other platforms. This is expected to strengthen revenue visibility while deepening the company’s foothold in the high-margin military training and simulation market.

Kratos Defense’s new 55,000-square-foot hypersonic system manufacturing and payload integration facility in Princess Anne, MD, will expand the company’s production and integration capacity for hypersonic systems and related technologies. This will enable faster turnaround and increased testing cadence, particularly supporting its large $1.4 billion MACH-TB 2.0 hypersonic test bed program and similar contracts with U.S. defense customers. 

KTOS is set to benefit meaningfully from this development, as its Valkyrie UAS becomes a core platform in the U.S. Marine Corps’ Collaborative Combat Aircraft program led by Northrop Grumman. The partnership also accelerates operational deployment, improving near-to-medium-term cash flow visibility and enhancing investor confidence in KTOS’ long-term defense growth prospects.

In December 2025, Kratos Defense announced the successful completion of factory acceptance testing between its EPOCH Command and Control (C2) software and Airbus’ OneSat next-generation software-defined satellite platform. This strengthens the company’s position in the growing software-defined space segment, validates its technology for managing highly dynamic, reconfigurable satellites, and paves the way for operational use.

In December 2025, Kratos Defense received nearly $30 million in Air Defense and C5ISR system national-security-related, military-grade custom hardware production contracts. This should help the company boost near-term revenues while expanding its involvement in high-priority national security programs.

Estimates for KTOS Stock

The Zacks Consensus Estimate for KTOS’ 2026 earnings per share (EPS) indicates an increase of 41.92% year over year. The Zacks Consensus Estimate for 2026 sales indicates an improvement of 20.15% year over year.
 

The Zacks Consensus Estimate for Curtiss-Wright’s 2026 EPS indicates an increase of 11.72% year over year. CW’s long-term (three to five years) earnings growth rate is 15.05%. The consensus estimate for HEICO’s fiscal 2026 EPS indicates an increase of 12.04% year over year. HEI’s long-term earnings growth rate is 16.5%.

KTOS’ Earnings Surprise History

The company beat on earnings in each of the trailing four quarters, delivering an average surprise of 29.17%.

KTOS’ Debt Position & Liquidity

Currently, the company’s total debt to capital is nil, whereas the industry’s average is 43.68%. 
 

The company’s current ratio is 4.3. A current ratio above one indicates that the company has more current assets than current liabilities, suggesting it is generally capable of meeting its short-term financial obligations.

KTOS Stock Trades at a Discount

In terms of valuation, KTOS’ forward 12-month price/sales (P/S) is 9.45X, a discount to the industry’s average of 12.06X.

What Should an Investor Do?

Kratos Defense continues to strengthen its long-term growth outlook through steady unmanned systems leadership, high-margin training and simulation contracts, expanding hypersonics manufacturing capacity, and deeper participation in priority U.S. defense programs. Recent contract wins, facility expansion, and technology validations improve revenue visibility, operational scale, and positioning across unmanned, hypersonic, space and national security markets.

Considering its price outperformance, earnings growth, better debt and liquidity levels, and discounted valuation, investors may consider adding this Zacks Rank #2 (Buy) stock to their portfolios at current levels.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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