KTOS

Kratos is a defense-technology company levered to high-priority programs — unmanned drones (Valkyrie), tactical/strategic missiles, hypersonics and space — squarely in the path of rising defense spending. The top line reflects that momentum: revenue grew 18.5% to $1.35B, the seventh straight year of growth from $812M in FY2021. The balance sheet is pristine: zero long-term debt, $561M of cash (up 70.2%, bolstered by equity issuance) and just 0.24x liabilities/equity, giving Kratos ample capacity to invest into demand.

The problem is that almost none of this growth reaches the bottom line. Net income was only $22.0M on $1.35B of revenue — a 1.6% net margin, 1.9% operating margin and a 1.1% ROE — and operating income actually fell 11.7%. Worse, operating cash flow turned negative at -$42.1M as the company ramped capex 63.7% to $95.3M to build production capacity, and it funded growth partly by issuing shares (count up 11.4%), diluting holders. Accumulated deficit remains at -$642M.