Head-To-Head Analysis: Kratos Defense & Security Solutions (NASDAQ:KTOS) and Red Cat (NASDAQ:RCAT)

Kratos Defense & Security Solutions (NASDAQ:KTOS) and Red Cat (NASDAQ:RCAT) are both industrials companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, profitability, institutional ownership, earnings, dividends, risk and analyst recommendations.

Valuation & Earnings

This table compares Kratos Defense & Security Solutions and Red Cat”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Kratos Defense & Security Solutions	$1.35 billion	5.25	$22.00 million	$0.12	314.08
Red Cat	$40.73 million	13.56	-$72.07 million	($0.81)	-5.56

Kratos Defense & Security Solutions has higher revenue and earnings than Red Cat. Red Cat 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.

Profitability

This table compares Kratos Defense & Security Solutions and Red Cat’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Kratos Defense & Security Solutions	2.03%	3.07%	2.55%
Red Cat	-136.26%	-32.25%	-28.48%

Institutional & Insider Ownership

75.9% of Kratos Defense & Security Solutions shares are held by institutional investors. Comparatively, 38.0% of Red Cat shares are held by institutional investors. 1.5% of Kratos Defense & Security Solutions shares are held by company insiders. Comparatively, 12.5% of Red Cat shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Risk & Volatility

Kratos Defense & Security Solutions has a beta of 1.18, suggesting that its stock price is 18% more volatile than the S&P 500. Comparatively, Red Cat has a beta of 1.72, suggesting that its stock price is 72% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Kratos Defense & Security Solutions and Red Cat, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Kratos Defense & Security Solutions	1	1	22	2	2.96
Red Cat	2	1	5	2	2.70

Kratos Defense & Security Solutions currently has a consensus price target of $77.90, indicating a potential upside of 106.69%. Red Cat has a consensus price target of $16.29, indicating a potential upside of 261.90%. Given Red Cat’s higher probable upside, analysts plainly believe Red Cat is more favorable than Kratos Defense & Security Solutions.

Summary

Kratos Defense & Security Solutions beats Red Cat on 10 of the 14 factors compared between the two stocks.

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.

About Red Cat

Red Cat Holdings, Inc. engages in the provision of various products, services, and solutions to the drone industry. The company operates through two segments: Enterprise and Consumer. It built infrastructure to manages drone fleets and fly, and provide services remotely, navigate confined industrial interior spaces and dangerous military environment. Red Cat Holdings, Inc. is based in San Juan, Puerto Rico.