Critical Review: Kratos Defense & Security Solutions (KTOS) versus Aerojet Rocketdyne (AJRD)

Aerojet Rocketdyne (NYSE: AJRD) and Kratos Defense & Security Solutions (NASDAQ:KTOS) are both aerospace companies, but which is the better stock? We will contrast the two businesses based on the strength of their earnings, risk, valuation, institutional ownership, profitability, analyst recommendations and dividends.

Insider and Institutional Ownership

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97.8% of Aerojet Rocketdyne shares are owned by institutional investors. Comparatively, 74.8% of Kratos Defense & Security Solutions shares are owned by institutional investors. 2.7% of Aerojet Rocketdyne shares are owned by company insiders. Comparatively, 17.9% of Kratos Defense & Security Solutions shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Aerojet Rocketdyne and Kratos Defense & Security Solutions’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Aerojet Rocketdyne -0.49% 47.43% 2.44%
Kratos Defense & Security Solutions -5.68% 0.73% 0.31%

Analyst Recommendations

This is a summary of current ratings for Aerojet Rocketdyne and Kratos Defense & Security Solutions, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Aerojet Rocketdyne 0 1 2 0 2.67
Kratos Defense & Security Solutions 0 4 5 0 2.56

Aerojet Rocketdyne currently has a consensus target price of $37.50, suggesting a potential upside of 33.50%. Kratos Defense & Security Solutions has a consensus target price of $13.44, suggesting a potential upside of 26.00%. Given Aerojet Rocketdyne’s stronger consensus rating and higher probable upside, research analysts clearly believe Aerojet Rocketdyne is more favorable than Kratos Defense & Security Solutions.

Earnings & Valuation

This table compares Aerojet Rocketdyne and Kratos Defense & Security Solutions’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Aerojet Rocketdyne $1.88 billion 1.12 -$9.20 million $0.74 37.96
Kratos Defense & Security Solutions $751.90 million 1.47 -$42.70 million $0.04 266.75

Aerojet Rocketdyne has higher revenue and earnings than Kratos Defense & Security Solutions. Aerojet Rocketdyne is trading at a lower price-to-earnings ratio than Kratos Defense & Security Solutions, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Aerojet Rocketdyne has a beta of 1.03, meaning that its share price is 3% more volatile than the S&P 500. Comparatively, Kratos Defense & Security Solutions has a beta of 1.86, meaning that its share price is 86% more volatile than the S&P 500.

Summary

Aerojet Rocketdyne beats Kratos Defense & Security Solutions on 9 of the 14 factors compared between the two stocks.

About Aerojet Rocketdyne

Aerojet Rocketdyne Holdings, Inc. designs, develops, manufactures, and sells aerospace and defense products and systems in the United States. The company operates through two segments, Aerospace and Defense, and Real Estate. The Aerospace and Defense segment offers aerospace and defense products and systems for the United States government, including the Department of Defense, the National Aeronautics and Space Administration, and aerospace and defense prime contractors. This segment provides propulsion systems, such as liquid, solid, air-breathing, and electric propulsion systems for space, defense, civil, and commercial applications; and armament systems for precision tactical and missile defense propulsion, tactical missile propulsion, and hypersonic propulsion systems. The Real Estate segment engages in the re-zoning, entitlement, sale, and leasing of the company's excess real estate assets. It owns 11,451 acres of land adjacent to the United States Highway 50 between Rancho Cordova and Folsom, California east of Sacramento. The company was formerly known as GenCorp Inc. and changed its name to Aerojet Rocketdyne Holdings, Inc. in April 2015. Aerojet Rocketdyne Holdings, Inc. was founded in 1915 and is headquartered in El Segundo, California.

About Kratos Defense & Security Solutions

Kratos Defense & Security Solutions, Inc. provides mission critical products, solutions, and services in the United States. The company operates through three segments: Kratos Government Solutions, Unmanned Systems, and Public Safety & Security. The Kratos Government Solutions segment offers microwave electronic products, satellite communications, training systems, modular systems, and defense and rocket support services. The Unmanned Systems segment provides unmanned aerial systems, and unmanned ground and seaborne systems. The Public Safety & Security segment designs, engineers, deploys, operates, integrates, maintains, and operates security and surveillance solutions for homeland security, public safety, critical infrastructure, government, and commercial customers. The company serves national security related agencies, the department of defense, intelligence agencies, and classified agencies, as well as international government agencies and domestic and international commercial customers. Kratos Defense & Security Solutions, Inc. was founded in 1994 and is headquartered in San Diego, California.

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