Kratos Defense & Security Solutions, Inc. (KTOS): fair value, margin of safety and Wheel Score

Is KTOS undervalued?

Kratos Defense & Security Solutions, Inc. (KTOS) closed at 40.74 on 16 Oct 2026, 604% above the GLS average fair value of 5.79. 5 of the 5 models that produced a number value the shares below the current price. A gap this wide usually means the market is paying for growth or a story the trailing numbers do not show yet; the models work from filed results, not forecasts, so they are conservative by design.

There is a wide gap between EPV (1.82) and Graham Growth (9.37). When the models are this far apart the "fair value" is really a range, and the margin of safety above should be read with that range in mind.

The nightly engine files KTOS under High Growth: revenue and earnings growing fast enough that the growth-based models carry the valuation.

Nine valuation models for KTOS

Each model turns the latest filed numbers into a value per share; the GLS fair value is the simple average of the ones that produce a positive number. The last two rows are shown for reference and never enter the average. The Quote page lets you switch any model off and add your own margin of safety.

Quality and financial health

Kratos Defense & Security Solutions, Inc. scores 5 of 9 on the Piotroski F-score: a middling result that falls one point short of the Sunday Scan's "6 or more" rule. Some of the nine tests on profitability, leverage and efficiency are failed, so the accounts are worth a look before selling a put on the name. A GLS Moat score of 4.1/10 is a weak reading: the ten-year history the score grades (revenue, EPS, book value, margins, cash flow, share count, ROIC) has not been steady, so the Moat part of the Wheel Score contributes little.

Returns on capital are thin or negative - ROIC 1.0%, ROE 1.1%, ROA 0.9% - with debt at 0.07 times equity and negative free cash flow.

Kratos Defense & Security Solutions, Inc. pays no dividend, so the DDM model does not apply and a covered-call holder earns only the premium and any price gain. Revenue comes mainly from Product 63%, Service 37% (quarter Q2 FY2026).

Institutional ownership scores 10/10, insider activity 1/10 and Congressional trading 5/10 on the GLS smart-money scales.

Wheel Score 55: Fair

A Wheel Score of 55 puts Kratos Defense & Security Solutions, Inc. in the Fair band - below the 70 the Sunday Scan requires. Value 0/25, Health 11/20, Moat 6/15, Premium 18/20 and Stability 20/20; the weakest part is Value (0/25).

Implied volatility is 67% on the near-the-money contracts 20-60 days out - above the 60% ceiling of the sweet spot. Premiums are large, but the Wheel Score tapers the Premium points (18 of 20) because volatility this high usually comes with a reason. The option chain is deep: 173,229 contracts of open interest across all expiries, which means tight fills at most strikes.

Volume runs at 5.1M shares a day on a market cap of $7.6B, with a beta of 1.11; the Stability part of the Wheel Score gives that 20 of 20.

The Wheel Score ranks ~7,400 US stocks for selling cash-secured puts and covered calls; it is updated nightly and is not a recommendation. The walkthrough lesson shows how the score fits into a trade, start to finish.

Upcoming events

The next earnings report is due on 3 Nov 2026 (after the close), 18 days away; a 30-45-day put sold today would expire after it, which is worth weighing against the premium.

Earnings, dividend, IPO, split and economic calendars for the whole market, filterable to your watchlists.

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