Kratos Defense & Security Solutions (NASDAQ: KTOS) and Elbit Systems (NASDAQ:ESLT) are both aerospace companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, valuation, profitability, institutional ownership, analyst recommendations, dividends and risk.

Dividends

Elbit Systems pays an annual dividend of $1.76 per share and has a dividend yield of 1.3%. Kratos Defense & Security Solutions does not pay a dividend. Elbit Systems pays out 31.8% of its earnings in the form of a dividend.

Risk & Volatility

Kratos Defense & Security Solutions has a beta of 1.8, meaning that its share price is 80% more volatile than the S&P 500. Comparatively, Elbit Systems has a beta of 0.59, meaning that its share price is 41% less volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Kratos Defense & Security Solutions -3.39% -1.21% -0.45%
Elbit Systems 7.13% 16.32% 5.88%

Valuation & Earnings

This table compares Kratos Defense & Security Solutions and Elbit Systems’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Kratos Defense & Security Solutions $668.70 million 1.69 -$60.50 million ($0.32) -34.16
Elbit Systems $3.26 billion 1.73 $236.90 million $5.54 23.85

Elbit Systems has higher revenue and earnings than Kratos Defense & Security Solutions. Kratos Defense & Security Solutions is trading at a lower price-to-earnings ratio than Elbit Systems, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

71.4% of Kratos Defense & Security Solutions shares are owned by institutional investors. Comparatively, 11.2% of Elbit Systems shares are owned by institutional investors. 17.9% of Kratos Defense & Security Solutions shares are owned by company insiders. Comparatively, 0.8% of Elbit Systems shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of current ratings for Kratos Defense & Security Solutions and Elbit Systems, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kratos Defense & Security Solutions 0 4 5 0 2.56
Elbit Systems 0 2 0 0 2.00

Kratos Defense & Security Solutions currently has a consensus target price of $13.06, indicating a potential upside of 19.45%. Elbit Systems has a consensus target price of $110.00, indicating a potential downside of 16.75%. Given Kratos Defense & Security Solutions’ stronger consensus rating and higher possible upside, equities research analysts plainly believe Kratos Defense & Security Solutions is more favorable than Elbit Systems.

Summary

Elbit Systems beats Kratos Defense & Security Solutions on 8 of the 15 factors compared between the two stocks.

Kratos Defense & Security Solutions Company Profile

Kratos Defense & Security Solutions, Inc. is a technology, intellectual property and proprietary product and solution company focused on the United States and its allies’ national security. The Kratos Government Solutions segment includes the operations of Defense Rocket Support Services, Microwave Electronics Division, Technical and Training Solutions, and Modular Systems, which provide technology-based defense solutions, involving products and services, with the focus relating to the nation’s Command, Control, Communications, Computing, Combat Systems, Intelligence, Surveillance and Reconnaissance requirements. The Unmanned Systems segment includes its unmanned aerial, ground, seaborne and command, control and communications system business. The Public Safety & Security segment provides integrated solutions for homeland security, public safety, critical infrastructure, and security and surveillance systems for government and commercial applications.

Elbit Systems Company Profile

Elbit Systems Ltd. is an international technology company engaged in a range of programs across the world. The Company develops and supplies a portfolio of airborne, land and naval systems and products for defense, homeland security and commercial aviation applications. Its systems and products are installed on new platforms, and it also performs platform modernization programs. In addition, it provides a range of support services. The Company’s activities include military aircraft and helicopter systems; helmet mounted systems; commercial aviation systems and aerostructures; unmanned aircraft and unmanned surface vessels; land vehicle systems; command, control, communications, computer and intelligence (C4I) systems; intelligence and cyber systems; electro-optic and countermeasures systems; electronic warfare and signal intelligence systems, and various commercial activities. It operates primarily in the defense and homeland security arenas.

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