Investors in Kratos Defense & Security Solutions (NASDAQ:KTOS) have unfortunately lost 33% over the last three years

For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) shareholders have had that experience, with the share price dropping 33% in three years, versus a market return of about 25%. The falls have accelerated recently, with the share price down 14% in the last three months.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

Check out our latest analysis for Kratos Defense & Security Solutions

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

We know that Kratos Defense & Security Solutions has been profitable in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics might give us a better handle on how its value is changing over time.

Revenue is actually up 11% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Kratos Defense & Security Solutions more closely, as sometimes stocks fall unfairly. This could present an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth

Kratos Defense & Security Solutions is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Kratos Defense & Security Solutions will earn in the future (free analyst consensus estimates)

A Different Perspective

Kratos Defense & Security Solutions shareholders have received returns of 32% over twelve months, which isn't far from the general market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 2% per year. It is possible that management foresight will bring growth well into the future, even if the share price slows down. It's always interesting to track share price performance over the longer term. But to understand Kratos Defense & Security Solutions better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Kratos Defense & Security Solutions you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.