Investing.com -- Karman Holdings Inc. (NASDAQ: KRMN) shares fell 2.1% Wednesday after short-seller JCap published a report questioning the company's valuation and cash flow generation.

The defense contractor has posted revenue growth and profitability without generating positive operating cash flows, according to JCap's Equity Dispatch report. The short-seller questioned whether the company's rising revenue and backlog will translate into the cash generation implied by its current share valuation.

JCap raised concerns about Karman's acquisitions, which are frequently funded by debt and disclosed as "not material" despite significant payments. The report also cited ongoing weak internal controls at the company, given the accounting challenges associated with defense products.

The shares trade at a forward price-to-earnings multiple of around 70 times for 2026 based on consensus estimates, according to the report. Using Karman's guided adjusted EBITDA of $218.8 million at the midpoint for 2026, the company's enterprise value-to-EBITDA multiple stands at approximately 28 times, representing a 70% premium to the S&P 500 and a 50% premium to the aerospace and defense sector.

JCap noted that the company's guided EBITDA includes a negative cash drag from a rapid buildup in contract assets, making it a poor proxy for cash flow. Adjusting for this would yield a much lower EBITDA figure, the short-seller said.