What happened

Shares of tiny defense contractor Kratos Defense & Security Solutions (NASDAQ:KTOS) advanced 11% in the first month of the new year, entering January worth only $7.40 a share but exiting at $8.24. And truth be told, February is starting to look pretty good for Kratos as well, with the stock up a further 8% since the month began.

So what

Can Kratos keep this streak running? That's hard to say. For much of last year, Kratos stock enjoyed strong gains in response to promises of big profits to come, once the U.S. begins buying Kratos' advanced jet-powered combat drones in volume. But that hasn't happened yet.

Take a look at Kratos' press releases during the remarkable run its stock enjoyed in January (and into February). For the most part, what you'll find is reports of Kratos making the rounds of Wall Street's investor conferences, making presentations at Needham and at Noble Capital, at Cowen & Company and even at the Nineteenth Annual Directed Energy Symposium down in Huntsville, Alabama.

Kratos UTAP unmanned aerial vehicle pictured against American flag.

Give Kratos Defense this much: They sure do know how to market themselves. Image source: Kratos Defense.

What you won't find is much mention of Kratos scoring contract wins, reporting profits, or even increasing its guidance to promise profits in the future. (The company did secure one contract to provide "RF monitoring and interference detection" services to SES Satellites, but no dollar value was mentioned in that press release.) Meanwhile, Kratos apparently has a good story, and one that's impressing the analysts (I mean, somebody has to have been doing all this Kratos stock-buying these past six weeks), but the company hasn't reported a single quarter of positive GAAP profits in more than a year.

Now what

Nor can Kratos report any such profits -- at least not before its Q4 earnings report comes out, and that one's not due to be published until March 8. (And according to analysts who study the stock, it's likely to feature a $0.02 per share ­loss on stagnant revenue, which won't do the stock much good.)

In the meantime, Kratos' stock performance will presumably rise or fall depending on investors' optimism about its chances of winning a big drones contract from the Pentagon.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.