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

Volatility and Risk

Kratos Defense & Security Solutions has a beta of 2.03, indicating that its share price is 103% more volatile than the S&P 500. Comparatively, DigitalGlobe has a beta of 1.01, indicating that its share price is 1% more volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Kratos Defense & Security Solutions -6.29% -1.40% -0.44%
DigitalGlobe 0.64% 2.40% 0.97%

Insider and Institutional Ownership

73.3% of Kratos Defense & Security Solutions shares are held by institutional investors. Comparatively, 96.3% of DigitalGlobe shares are held by institutional investors. 23.2% of Kratos Defense & Security Solutions shares are held by insiders. Comparatively, 1.9% of DigitalGlobe shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Kratos Defense & Security Solutions and DigitalGlobe’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Kratos Defense & Security Solutions $701.00 million 1.44 $20.10 million ($0.66) -17.51
DigitalGlobe $809.90 million 2.67 $402.60 million $0.02 1,740.87

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

Analyst Ratings

This is a summary of recent recommendations for Kratos Defense & Security Solutions and DigitalGlobe, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kratos Defense & Security Solutions 0 2 5 0 2.71
DigitalGlobe 0 4 1 0 2.20

Kratos Defense & Security Solutions presently has a consensus target price of $12.89, suggesting a potential upside of 11.58%. DigitalGlobe has a consensus target price of $33.90, suggesting a potential downside of 2.59%. Given Kratos Defense & Security Solutions’ stronger consensus rating and higher possible upside, equities analysts clearly believe Kratos Defense & Security Solutions is more favorable than DigitalGlobe.

Summary

DigitalGlobe beats Kratos Defense & Security Solutions on 8 of the 13 factors compared between the two stocks.

About Kratos Defense & Security Solutions

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.

About DigitalGlobe

DigitalGlobe, Inc. is a provider of Earth imagery, data and analysis. The Company’s imagery solutions and other services support a range of uses, including mission-planning, mapping and analysis, environmental monitoring, oil and gas exploration and infrastructure management. The Company’s imagery solutions and other services are sourced from its own satellite constellation and third-party providers. The Company sells its products and services through a combination of direct and indirect channels, consisting of a global network of resellers, strategic partners and direct enterprise sales to its United States Government and Diversified Commercial customer groups. The Company offers products consisting of imagery from its constellation of satellites, and provides geospatial products and services. The Company processes its imagery to varying levels according to its customers’ specifications and delivers its products using the distribution method.

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