Kratos CEO Sold $19M at $64. Stock Now Trades at $47.
Kratos Defense CEO Eric Demarco liquidated approximately $19.3 million in company stock on August 14 — ten days after Q2 earnings — at prices between $63 and $66 per share. KTOS now trades at $46.69,
Kratos CEO Sold $19M at $64. Stock Now Trades at $47.
NEW YORK, September 11 —
Kratos Defense & Security Solutions, Inc. (KTOS) has beaten Wall Street's EPS estimates in each of the last four quarters, each time by a wider margin, yet CEO Eric Demarco liquidated $19.3 million in shares on August 14, ten days after Q2 results, at prices between $63 and $66, more than a third above where the stock trades today.
- Q2 EPS of $0.21 beat the consensus by 39.5%; trailing-twelve-month revenue grew 30.5% to $1.52 billion.
- CEO Demarco sold 300,000 shares at $63 to $66 on August 14; six executives combined for $24.4 million in 90-day sales, zero purchases.
- Free cash flow was negative $118 million trailing; KTOS trades at 41.8x forward P/E, down 63% from its all-time high.
The CFO Sold Before Earnings, the CEO After
CFO Deanna Lund sold 5,000 shares on August 3, the day before Kratos filed its Q2 8-K, at prices between $46.55 and $48.95. Ten days after filing, CEO Eric Demarco sold 300,000 shares in four tranches at $63.33 to $66.17, collecting roughly $19.3 million. STC Division President Phillip Carrai sold 26,500 shares at $63 to $65 three days later; Director Scot Jarvis sold 10,000 shares at $63.50 a day after that. Six executives sold a combined $24.4 million in 90 days with no purchases. The CFO's sale predated the filing; the CEO's came after, at prices more than a third above where KTOS trades today.
Thirty Percent Growth Without the Cash to Show for It
Kratos builds jet-powered drone systems, hypersonic vehicles, and rocket and missile propulsion for the U.S. Department of Defense, a hardware mix that has driven 30.5% trailing revenue growth to $1.52 billion. The bull case rests on that trajectory. The problem is the engine: free cash flow was negative $118 million in the trailing twelve months, gross margin stands at 23%, and a DCF model at 41.8x forward earnings with no current cash generation requires aggressive assumptions about future profitability. Four consecutive EPS beats are a positive sign, but they don't close the gap between reported growth and cash actually produced.
| Ticker | Mkt cap | Fwd P/E | 52-wk |
|---|---|---|---|
| KTOS | $8.8B | 41.8x | -32.1% |
| AVAV | $7.5B | 32.9x | -39.5% |
| RCAT | $1.2B | n/a | -26.5% |
| ONDS | $4.1B | n/a | +10.5% |
| RDW | $2.7B | n/a | +25.1% |
| LHX | $45.7B | 18.3x | -11.0% |
What the $104 Target Requires
The median analyst price target of $104.20 implies more than double the current KTOS price, built on one assumption: that Kratos's drone and hypersonic programs eventually generate cash. The bull case has real support. The company's aerial target vehicle has logged 43 successful missions in missile-defense testing, and Kratos holds $1.44 billion in cash against just $0.19 billion in debt. Against that sits a management team holding 1.3% of the float that sold into the rally without a single offsetting purchase. Q3 operating cash flow is the test: a positive number validates the thesis; another negative quarter raises the same question the insider sales already answered. Run the free Kratos Defense & Security Solutions, Inc. deep-dive →
Basis Report is independent research for informational purposes. It is not investment advice and not a recommendation to buy or sell any security.
Kratos Defense CEO Eric Demarco liquidated approximately $19.3 million in company stock on August 14 — ten days after Q2 earnings — at prices between $63 and $66 per share. KTOS now trades at $46.69, and six executives sold a combined $24.4 million in the 90-day window with zero insider purchases.