Why Kratos Defense Stock Dropped Then Rebounded Today
Key Points
Two Kratos insiders announced large share sales recently.
That isn't what investors should focus on, however.
Kratos still has a high valution, which could mean more downside.
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Kratos Defense & Security Solutions (NASDAQ: KTOS) stock has been declining for the last 10 weeks. That trend continued early today, with two new Securities and Exchange Commission (SEC) filings potentially serving as the trigger.
After dropping nearly 6% this morning, though, Kratos shares recovered from that loss. The stock was up by 1.9% as of 10:38 a.m. ET. That still leaves the drone and military technology company down 46% since mid-January.
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Kratos drones aren't the only thing sky-high
Today's initial slump came as two insiders revealed share sales. Director and chairman of the board William Hoglund announced the sale of 91,500 shares in a filing yesterday. The insider had bought those shares in two separate lots, now worth about $6.5 million, in 2014 and 2016, respectively.
Steve Fendley, president of Kratos' Unmanned Systems Division, also reported the sale of 7,000 shares yesterday. Fendley's transactions occurred on March 30, but were part of a trading plan adopted nearly a year ago. That helps to explain why investors reversed course today after realizing the sales weren't consequential. Fendley also still directly owns almost 360,000 shares.
The declining trend in Kratos stock is what investors should take notice of, however. The maker of drones and other military technology is well-positioned, as militaries around the world will likely look to restock after recent hostilities cool.
But Kratos is trading at a sky-high price-to-earnings (P/E) ratio based on its 2026 outlook. While the forward P/E has dropped along with the stock price, investors should be wary of a name still trading at about 85 times that metric.
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Howard Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Kratos Defense & Security Solutions. The Motley Fool has a disclosure policy.
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