When the markets face constant fluctuations and investor battles like never before, it becomes necessary to understand what stocks are really performing well and are a reliable investment, both in terms of growth and for the long-term perspective. Two such stocks that grab attention are Kratos Defense and Security Solutions Inc. (KTOS) and Skechers U.S.A. Inc. (SKX). While Kratos has recently become popular in the market, having already returned 61% in the last year and is rapidly gaining investor traffic, Skechers makes for the long run, mature option that is a safe bet for the risk-averse investor.
Let’s have a look at the two stocks and their future prospects in detail.
Kratos Defense and Security Solutions Inc. (KTOS) develops and fields affordable and transformative technology, platforms, and systems for the United States National Security related customers, allies, and commercial enterprises. Kratos is revolutionizing the way breakthrough technology for defense industries are rapidly brought to the market through instant commercialization and venture-capital backed approaches.
This company estimates a 40% year-on-year growth, with its rapid recapitalization of strategic weapon systems by the U.S. and its allies, as announced in the third quarter of the previous year. Kratos has continued to execute their objective of being a technology company bringing in affordable disruptive systems and products to the national security market.
Just recently, Kratos received an additional order from an international customer for 20 high-performance jet drones and support equipment to satisfy their continuing missions and operations, showing how quickly the company is expanding its reach and production capacity.
The latest and most significant advancement for the company was when its Unmanned System Divisions deployed its self-driving truck, known as the Autonomous Truck Mounted Attenuator (ATMA), in 8 locations across the United States and the U.K. This truck not only makes for a huge technological advancement, but also sparks significant interest in the highway maintenance industry.
In the commercial highway maintenance industry, driving a Truck Mounted Attenuator (TMA) is considered as one of the most dangerous tasks in the work zone, as it acts as a human-driven mobile crash barrier to protect highway maintenance operations in order to safeguard workers and equipment from errant drivers entering the zone. As Kratos identified the risk in driving this vehicle, their newfound technology used to build the ATMA overcomes this hindrance, and is a big boost for the company and its future prospects.
As for the financials, the company has made slow but sound progress. It’s return on capital employed has increased steadily to 2.6%, making year on year progress. The company is making more money per dollar of capital used, and the amount of capital used has increased too, by 73%. It’s remarkable 839% returns growth over the past 5 years shows that the company is only riding for higher potentials.
2 Year Returns of Kratos and Skechers
One of the most established shoes and apparel retail companies in the world, having built a nearly 30 year old rock solid foundation, Skechers makes for long-term value investment. Despite facing a global pandemic where the entire world’s offline retailing was harmed in 2020, Skechers has shown a stellar comeback and has only a brighter outlook in the future.
Skechers’ revenue fell during the pandemic by 42% from its 2019 levels. But, like its peers, it created a global e-commerce platform to reach consumers directly, and made rapid progress in the latter half of last year. Since Q2, the company has been growing in triple digit percentages, including a 143% increase during the final months of the year. Even with the pandemic, it’s Q3 sales was nearly back to 2019’s levels, and it’s Q4 revenue earnings fell short of just 0.5% at $1.32 billion when the pandemic concerns grew and market sentiment was withdrawn.
Another strong point for this company is it’s emergence into tier II developing countries. Having a growing penchant for the brand in China, where it received a 23.9% rise in sales in the third quarter of last year, and having 2/3rd of its sales coming from the overseas market, Skechers has a strong global footing which is difficult to deter. Recently, the company launched 6 new stores in the Middle East and CIS countries.
Skechers also has a fortress of a balance sheet that will allow the company to weather just about any storm. With its cash and investments reaching $1.5 billion at the end of Q3 against a backdrop debt of $800 million, its net cash position allows the company to face any crises with a wide margin of comfort. Now, with the announcement of vaccine rollouts and decreasing coronavirus cases, along with Biden’s stimulus push enabling a hastened restart to the economy, Skechers has great potential to tap into the retail market once the heavy dust of pandemic induced problems settle down.
To Invest Or Not To Invest?
Both Skechers and Kratos have a strong footing in the market, and have promising prospects and objectives to secure their growth in the future. But before entering into any investment prospects, one must analyse the risk appropriately. The pandemic’s outcome still remains uncertain, and with the new coronavirus strain increasing market trepidation, analysts caution investors to gauge every aspect before entering any position. Having said that, how these two companies play out their objectives in the future undoubtedly makes for an interesting rally to watch for.