Kratos Defense & Security (KTOS 0.55%) stock plunged today, even after the company announced yesterday that it had received a major contract from the U.S. military. At 2:35 p.m. ET, Kratos stock was near the low of the day, down by 7.8%.
Yesterday, the company announced a massive contract to support the U.S. Space Force, worth up to $446.8 million. That's great news for a company that reported a total of $1.35 billion in full-year 2025 revenue. So what gives?
Image source: The Motley Fool.
Sell the news mentality
When a company reports good news and investors sell the stock, there must be more going on. Kratos was awarded a valuable contract to lead a team integrating existing and next-generation ground assets supporting the Resilient Missile Warning and Tracking (MWT) program for the U.S. Space Force.
That's undoubtedly good for the company and will boost its already rapid business expansion. But investors have already built a lot of good news into Kratos' valuation. Even after the stock has dropped more than 20% over the last month, shares still trade at a premium valuation.
NASDAQ: KTOS
Key Data Points
A price-to-sales (P/S) ratio of about 8 means investors expect more large contracts to be announced. In the meantime, some opted to sell on the news and perhaps allocate those funds elsewhere.
A strong underlying business means this name could be a great stock to own. That time just isn't quite yet, as the stock continues to consolidate to a more reasonable valuation.
