Shares of Kratos Defense & Security Solutions (KTOS +1.10%) have been on the decline despite investors' focus on military action in the Middle East. The stock continued to slide today, lower by 7.1% at 12:25 p.m. ET.
Kratos Defense stock has now dropped by more than 22% over just the past month. A company insider just sold shares, but that doesn't explain the overall negativity.
Image source: The Motley Fool.
Valuation is correcting
The latest news for investors was that Stacey Rock, president of Kratos' Turbine Technologies Division, reported selling 4,000 shares late last week. That division develops affordable turbojets, turbofans, and solid rocket motors for drones and other aerospace systems. Drones have been a focus of recent global hostilities, and investors poured into Kratos stock last year.
But with shares 30% off recent March highs, investors might wonder why an inside executive would be selling. Rock's sales are part of a prearranged trading plan adopted last June. So it's no reason for investors to think he is losing confidence in the stock. He still directly owns nearly 22,000 shares.
NASDAQ: KTOS
Key Data Points
What should concern investors more is the valuation. Shares nearly tripled last year and were up by 300% at one point in 2025. Even after the recent decline, Kratos stock trades at a premium. Sales are expected to grow by more than 20% next year, but the company still trades at a price-to-sales ratio of over 7.5. With the company recording low earnings, the stock's future price-to-earnings (P/E) ratio is also high, though earnings are expected to rise quickly.
Investors should consider Kratos a speculative play, but it could be one worth holding as a long-term position in a diverse portfolio.
