Kratos (KTOS) Pops after Money Manger Calls Stock "Stupidly Cheap"

September 17, 2012 9:08 AM EDT
Shares of Kratos Defense & Security Solutions (Nasdaq: KTOS) are higher by 10 percent early on Monday after a money manager called the stock was "stupidly cheap." The unusually blunt comments appeared in a weekend article in Barron’s.

Known as a pure play defense stock, Kratos focuses on surveillance planes, electronic-warfare products such as radar systems for fighter jets, satellite ground systems, and ballistic-missile and rocket-testing systems. Despite being well positioned for future growth, the stock is lower by 42 percent in the past 12 months, mostly due to intense investor pessimism that has plagued not just Kratos, but the entire defense sector. In other words, as the old saying goes, Kratos is the baby and the defense sector is the dirty bath water.

Kratos is expected to lose $15 million, or 34 cents a share, this year, on revenue of $962 million, but much of that loss stems from one-time acquisition-related charges. Shares trade below historical multiples for defense companies and could command more in a buyout, noted the Barron’s article. Demand is strong for Kratos' products and revenue is on the rise. Oh, yeah, and the stock is "stupidly cheap".

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