Critical Analysis: Kratos Defense & Security Solutions (NASDAQ:KTOS) versus Carpenter Technology (NYSE:CRS)

Carpenter Technology (NYSE:CRS) and Kratos Defense & Security Solutions (NASDAQ:KTOS) are both industrials companies, but which is the better business? We will compare the two businesses based on the strength of their profitability, risk, dividends, institutional ownership, analyst recommendations, earnings and valuation.

Insider and Institutional Ownership

92.0% of Carpenter Technology shares are owned by institutional investors. Comparatively, 75.9% of Kratos Defense & Security Solutions shares are owned by institutional investors. 2.9% of Carpenter Technology shares are owned by insiders. Comparatively, 1.5% of Kratos Defense & Security Solutions shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Carpenter Technology and Kratos Defense & Security Solutions, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Carpenter Technology	0	1	8	1	3.00
Kratos Defense & Security Solutions	1	2	18	1	2.86

Carpenter Technology currently has a consensus target price of $577.25, indicating a potential upside of 21.18%. Kratos Defense & Security Solutions has a consensus target price of $99.47, indicating a potential upside of 108.01%. Given Kratos Defense & Security Solutions’ higher possible upside, analysts clearly believe Kratos Defense & Security Solutions is more favorable than Carpenter Technology.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Carpenter Technology	16.96%	26.46%	15.02%
Kratos Defense & Security Solutions	2.03%	3.07%	2.55%

Volatility & Risk

Carpenter Technology has a beta of 1.26, indicating that its share price is 26% more volatile than the S&P 500. Comparatively, Kratos Defense & Security Solutions has a beta of 1.11, indicating that its share price is 11% more volatile than the S&P 500.

Earnings & Valuation

This table compares Carpenter Technology and Kratos Defense & Security Solutions”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Carpenter Technology	$3.12 billion	7.56	$529.80 million	$10.52	45.28
Kratos Defense & Security Solutions	$1.35 billion	6.67	$22.00 million	$0.17	281.29

Carpenter Technology has higher revenue and earnings than Kratos Defense & Security Solutions. Carpenter Technology 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.

Summary

Carpenter Technology beats Kratos Defense & Security Solutions on 11 of the 14 factors compared between the two stocks.

About Carpenter Technology

Carpenter Technology Corporation engages in the manufacture, fabrication, and distribution of specialty metals in the United States, Europe, the Asia Pacific, Mexico, Canada, and internationally. It operates in two segments, Specialty Alloys Operations and Performance Engineered Products. The company offers specialty alloys, including titanium alloys, powder metals, stainless steels, alloy steels, and tool steels, as well as additives, and metal powders and parts. It serves to aerospace, defense, medical, transportation, energy, industrial, and consumer markets. The company was founded in 1889 and is headquartered in Philadelphia, Pennsylvania.

About Kratos Defense & Security Solutions

Kratos Defense & Security Solutions, Inc. engages in the provision of mission critical products, services and solutions for United States national security priorities. It operates through the Kratos Government Solutions (KGS) and Unmanned Systems (US) segments. The KGS segment consists of an aggregation of KGS operating segments, including microwave electronic products, space, satellite and cyber, training solutions. The US segment refers to the unmanned aerial, unmanned ground, unmanned seaborne and related command, control and communications system businesses. The company was founded on December 19, 1994, and is headquartered in Round Rock, TX.