Karman Holdings Inc. (KRMN): what the price assumes

Generated: 2026-07-29 · Exported: 2026-08-01 · Source: https://boothcheck.com/report/KRMN

Headline

Field	Value
Ticker	KRMN
Company	Karman Holdings Inc.
Current price	$45.82/sh
Composition	Hypersonics and Strategic Missile Defense 32% / Space and Launch 32% / Tactical Missiles and Integrated Defense Systems 36%

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	whole-company
Operating margin (value-band context)	29.5%
Operating margin today	16.2%
Margin expansion (value-band)	+13.3pp
Must persist for	20.3y
Multiple paid	81x operating income

The operating-margin figure is value-band context at year 5: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 12% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~2.8 years.

Reconcile: at the x-ray's 9.3% required return this reads ~13.5 years; the models below use their own rates.

How unusual the bet is: high

Reference	Value
cohort percentile (of 222 peers)	98
sustained it ~10 years at this level	14%
implied end-window share	0%

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	15.15x	2	expensive
Earnings	12.29x	2	expensive
Relative	5.31x	5	expensive
Growth	0.69x	1	justifies

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.2%); the inversion above states its own rate.

Per-Model Detail (n=10)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	$0.00	—	no	Negative/zero FCF — equity value floored at $0
DCF Exit Multiple	Growth	$0.00	—	no	Negative/zero FCF or EBITDA — equity value floored at $0
Relative Valuation	Relative	$18.52	2.47x	yes	P/E 48.4x (blended: static sector reference 22x + trailing (TTM) 203x), scenarios: 38.7x / 48.4x / 58.1x (bear / base = reference held flat / bull), EV/EBITDA 23.23x
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	—	—	no	—
Simple Excess Return	Asset	$2.44	18.78x	yes	BV/sh $3.06, ROE (TTM) 7.4%, ke 9.3%
Two-Stage Excess Return	Asset	$2.17	21.12x	yes	5yr excess ROE then converge to ke=9.3% (excluded from median)
Discounted Future Market Cap	Growth	$66.48	0.69x	yes	Rev $0.5B, growth 30% (input: historical growth; tapered), Terminal P/S: 9.3x / 11.6x / 13.9x (bear / base = today's held flat / bull, cap 12x)
Peter Lynch Fair Value	Relative	$2.76	16.60x	yes	EPS $0.23, growth 2% (input: historical EPS growth), PEG=101.35 (Overvalued)
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	$2.01	22.80x	yes	Normalized EBIT (latest-period EBIT; under 3y history) $0.02B × (1−10%) / WACC 9.2% → EPV (no growth) (excluded from median)
Residual Income	Asset	$2.13	21.51x	yes	BV $3.06 + 5yr PV of (ROE (TTM) 7.4% − Kₑ 9.3%) × BV; BV grows 4.8%/yr (excluded from median)
Graham Number	Asset	$3.98	11.51x	yes	√(22.5 × EPS $0.23 × BVPS $3.06) — Graham's conservative floor
EV/EBITDA Relative	Relative	$14.62	3.13x	yes	EBITDA $0.13B × sector EV/EBITDA 14.0x
FCF Yield	Earnings	—	—	no	—
SBC-Adj FCF Yield	Earnings	—	—	no	—
Ben Graham Formula	Earnings	$7.42	6.18x	yes	EPS $0.23 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/B	Asset	$1.84	24.90x	yes	BV $3.06 × (ROIC 5.6% / WACC 9.2%) (excluded from median)
P/Sales Sector	Relative	$7.89	5.81x	yes	Revenue $0.52B × sector P/S 2.0x
PEG Fair Value	Relative	$8.63	5.31x	yes	EPS $0.23 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings Yield	Earnings	$2.49	18.40x	yes	EPS $0.23 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Solvency

Field	Value
Net debt	$787.4m
Net debt / NOPAT (after-tax)	10.33x
Net debt / operating income (pre-tax)	9.33x
Burning cash	yes

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Karman builds the physical hardware inside missiles, hypersonic vehicles, and launch systems, spread roughly evenly across hypersonics and strategic missile defense, space and launch, and tactical missiles, so it sells into the fastest-funded corners of the defense budget rather than one program.
• The single number that defines the bet is the multiple: at roughly 100 times operating income the price embeds something like two decades of ceiling-rate growth, a durability assumption only a small fraction of fast-growers have ever sustained.
• Watch the backlog-to-revenue conversion: record backlog above $1 billion, up more than 60% year over year, is what the rich multiple is borrowing against, and the pace it converts to revenue is the thing that either validates or breaks the price.

Bull Case

The single most decisive number for Karman is the backlog, because it is the only thing large enough to justify the multiple. The company exited the most recent quarter with record backlog above $1 billion, up more than 60% year over year, against full-year 2026 revenue guidance of $720 million to $735 million. A backlog that exceeds a full year of revenue, growing faster than revenue, is contracted future work, not a hope. For a defense supplier, backlog is the closest thing to visibility the industry offers, and Karman's is expanding precisely as the programs it feeds get funded.

The business is diversified across the right end markets, which is what turns a components maker into a platform. The 10-K describes competing across "three core end markets including: Hypersonics", strategic missile defense, space and launch, and tactical missiles, and crucially notes that "no single program accounted for more than 10% of revenue on average" with revenue from over 100 active programs. That spread matters because it means no single cancellation sinks the company, while exposure to hypersonics and missile defense puts Karman in the categories the Department of Defense is funding hardest. In the most recent quarter Space and Launch grew 29% and Hypersonics and Strategic Missile Defense rose 19% to $36 million, so the growth is broad rather than concentrated in one lucky program.

The operating momentum is real and accelerating. First-quarter revenue hit a record $151.2 million, up 51% year over year, with adjusted EBITDA up nearly 50%, and management raised full-year guidance to imply roughly 54% revenue growth for 2026. The macro tailwind behind it is durable: the company points to rising 2027 defense funding requests for systems like SM-3, PAC-3, THAAD, and PrSM, the exact programs Karman's hardware goes into, which gives early visibility into 2027 and beyond. Against defense-and-space peers Kratos, AeroVironment, and Loar Holdings, Karman is growing faster than the cohort, and if the backlog converts at the guided pace, the company grows into a multiple that today looks impossible. That is the bull case: the growth is fast enough, for long enough, that the static valuation methods simply cannot frame it.

Bear Case

The disconnect a Karman holder has to confront is qualitative before it is numeric: this is a recently public, leveraged components supplier being priced as if it were a generational compounder. The price requires the company to grow operating profit at its self-funding ceiling for roughly two decades, and only about 14% of comparable fast-growers have sustained that kind of pace even ten years. The story is excellent and the backlog is real, but the price has run ahead of the proof. Every valuation method except the most growth-optimistic reads the stock as richly valued, and the gap between them is the largest single risk in the name.

The balance sheet is where an excellent story meets a hard constraint. Net debt sits near $787 million against only about $74 million of liquid assets, and trailing interest coverage is just 1.8 times, meaning operating profit barely covers the interest bill before anything is reinvested. The 10-K's own risk language is blunt about what that leverage does: it could "increase our vulnerability to general economic downturns and adverse competitive and industry conditions" and "require us to dedicate a substantial portion of our cash flows from operations to payments" on the debt. A company growing 50% a year needs working capital and capacity, and a thin interest cushion plus a fast cash-consuming growth ramp is a combination that leaves little margin for a slip. Coverage near 1.8 times is not the balance sheet of a business the market should be capitalizing at 100 times earnings.

The demand itself, however well-funded today, carries the structural fragility of government contracting. The 10-K warns that a reduction "in government spending power, could in the future result in a decline in customer spending," and that on multi-year fixed-price contracts the anticipated volume "may not materialize, which could result in excess inventory, inventory write-downs, or lower margins." Backlog is a commitment, not a guarantee, and defense priorities shift with budgets and administrations. The sell side has already started to recalibrate: KeyBanc cut its target to $100 from $122 and Piper Sandler trimmed to $114 from $127, both still positive but both lowering the bar. The bet is not that Karman fails. It is that the price already pays for two decades of flawless execution from a leveraged company with one full year as a public reporter, and any stumble in the backlog conversion gets repriced against a multiple with no support underneath it.

Valuation

The price here is making one of the most aggressive bets in the report-able universe. At today's level the market values Karman at roughly 100 times its operating income, and inverted that implies the company holds growth at its self-funding ceiling for about 22 years. That is not a forecast Karman has earned; it is the assumption the price requires. The honest framing is that this is a durability premium of an extreme kind, and the relevant base rate is sobering: only about 14% of comparable fast-growers have sustained that pace even a decade, let alone two.

The method families could hardly disagree more sharply, and the pattern is the whole story. The asset-value lens reads the price at more than twelve times where it lands, the earnings-power lens at nearly seven times, and the peer-multiple lens at almost six times. Only the growth-oriented cash-flow method reaches the price, and it does so by crediting the very long-duration compounding the inversion describes. When every static method says richly valued and only the forward-growth method reaches the price, the price is a bet on durable compounding that the conservative frames structurally cannot price. That is not a contradiction in the methods; it is the signature of a story stock, and it means there is no valuation floor underneath the price if the growth assumption weakens.

Solvency is the part of the picture the multiple ignores at its peril. Net debt near $787 million against about $74 million of liquid assets, with interest coverage of only 1.8 times, means the company is leveraged into its growth, not funding it from a fortress balance sheet. A business compounding revenue above 50% a year while covering its interest bill less than twice over is running a high-wire act: the growth has to keep paying for the debt. Against peers Kratos and AeroVironment, Karman commands a far richer multiple on the strength of its backlog and end-market mix, and the analyst targets clustered near $100 to $115 sit well above today's price. The street, in other words, is underwriting the same long-duration growth this framework isolates; the difference is that this report names the bet explicitly rather than embedding it in a target, and the bet is that two decades of ceiling growth actually arrive.

Catalysts

The first-quarter 2026 print was the loudest catalyst, and it cut in the bull's direction operationally. Karman posted record revenue of $151.2 million, up 51% year over year, with adjusted EBITDA up nearly 50% and record backlog above $1 billion, up more than 60% year over year. Management raised full-year 2026 guidance to revenue of $720 million to $735 million and adjusted EBITDA of $208.5 million to $219.5 million, implying roughly 54% revenue growth, and said first-quarter revenue plus backlog set to convert this year already covers about 90% of the raised guidance. A guidance raise backed by a backlog that already covers most of the number is the kind of visibility that keeps a richly valued growth stock supported.

The forward demand signals extend the runway into 2027. The company points to rising 2027 Department of War funding requests for the procurement of SM-3, PAC-3, THAAD, PrSM, unmanned and counter-unmanned systems, and submarines, the programs its hardware supplies, which it frames as early visibility into 2027 and beyond. Within the quarter, Space and Launch grew 29% and Hypersonics and Strategic Missile Defense rose 19% to $36 million, so the growth is broad-based across the funded categories.

The sell side is positive but trimming, which is the catalyst risk to watch. The consensus rating sits at Buy with a mean price target near $102 to $115, well above today's price, but KeyBanc cut its target to $100 from $122 and Piper Sandler trimmed to $114 from $127 in May, both keeping Overweight ratings. With targets still above the price but coming down, and a multiple that prices decades of growth, the next backlog and conversion update is the data point that decides whether the premium holds.

Peer Cohorts (Per Segment, With Filing Citations)

Karman Holdings (defense/space, single segment) (reported)

• LOAR (Loar Holdings Inc.)
• FY2025 10-K: …and defense industry; our heavy reliance on certain customers for a significant portion of our sales; the fact that we have in the past consummated acquisitions and our intention to continue to pursue acquisitions, and that our business may be adversely affected if we cannot consummate acquisitions on satisfactory…
• FY2025 10-K: …and continue to face and the risks and limitations that could harm our prospects, see "Cautionary Note Regarding Forward-Looking Statements," "Summary of Risk Factors" and "Risk Factors" included elsewhere in this Annual Report on Form 10-K. Competitive Strengths As a specialized supplier in the aerospace and defense…
• DCO (DUCOMMUN INCORPORATED)
• FY2025 10-K: …services primarily to the aerospace and defense industries. Our subsidiaries are organized into two strategic businesses, Electronic Systems and Structural Systems, each of which is an operating segment as well as a reportable segment. Electronic Systems designs, engineers and manufactures high-reliability electronic…
• FY2025 10-K: …additional threat protection measures, defending against litigation, responding to regulatory inquiries or actions, paying damages, providing customers with incentives to maintain a business relationship with us, or taking other remedial steps with third-parties, as well as incurring significant reputational harm. In…
• ATRO (ASTRONICS CORPORATION)
• FY2025 10-K: …injunction against tariffs imposed under IEEPA. It is unknown at this time if or when refunds will be issued for IEEPA tariffs previously paid by the Company. NOTE 20 - SEGMENTS The Company reports segment information based on the management approach, which designates the internal reporting used by the Chief…
• FY2025 10-K: 8,428 11,313 13,778 Cash and Cash Equivalents and Restricted Cash at End of Year $ 18,180 $ 18,428 $ 11,313 Supplemental Disclosure of Cash Flow Information Interest Paid $ 8,976 $ 19,238 $ 17,689 Income Taxes Paid, Net of Refunds $ 11,605 $ 3,537 $ 1,964 Non-Cash Investing Activities: Capital Expenditures in Accounts…
• AIR (AAR CORP)
• FY2025 10-K: …The U.S. Department of Defense, U.S. Department of State, other U.S. government agencies and their contractors are our only customers representing 10% or more of total sales in any of the last three fiscal years. Sales by segment for these customers are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May…
• FY2025 10-K: 05-31 0000001750 air:ForeignCountriesMember us-gaap:SalesMember us-gaap:GeographicConcentrationRiskMember 2023-06-01 2024-05-31 0000001750 air:USDepartmentOfDefenseOtherUSGovernmentAgenciesAndContractorsMember us-gaap:SalesMember us-gaap:CustomerConcentrationRiskMember 2022-06-01 2023-05-31 0000001750…
• KTOS (Kratos Defense & Security Solutions, Inc.)
• FY2025 10-K: …Stock Certificate. 10-K 02/27/2017 (001-34460) 4.1 4.2 Description of Equity Securities Registered under Section 12 of the Exchange Act. 10-K 02/24/2020 (001-34460) 4.4 10.1# Form of Indemnification Agreement by and between Kratos Defense & Security Solutions, Inc. and its directors and executive officers. 10-Q…
• FY2025 10-K: (1) Financial Statements The Consolidated Financial Statements of Kratos Defense & Security Solutions, Inc. and Report of Deloitte & Touche LLP, Independent Registered Public Accounting Firm, are included in a separate section of this Annual Report beginning on page F-1. (a)(2) Financial Statement Schedules All…
• AVAV (AEROVIRONMENT, INC.)
• FY2025 10-K: …growth platforms in the future, creating additional market opportunities. Effective May 1, 2025, we operate our business in two reportable segments: (1) Autonomous Systems and (2) Space, Cyber and Directed Energy. 3 Table of Contents ​ Autonomous Systems ​ Uncrewed Aircraft Systems ("UAS"). Our family of uncrewed…
• FY2025 10-K: …Autonomy, Teledyne Technologies, Inc., Sierra Nevada Corporation, Lockheed Martin Corporation, The Boeing Company, Textron, Inc., Shield AI, Inc., Northrop Grumman Corporation, Griffon Aerospace, Inc., L3Harris Technologies, Inc. and Israeli Aircraft Industries. ​ The defense and technology markets for the C-UAS and…
• RDW (Redwire Corp)
• FY2025 10-K: …autonomous systems and multi-domain operations, leveraging digital engineering and artificial intelligence automation. The Company develops and provides mission critical solutions based on space and defense technology platform offerings for government, commercial and civil customers through both short- and…
• FY2025 10-K: …segments and two reportable segments, Space and Defense Tech. The Space segment develops and provides next-generation spacecraft, large infrastructure, and microgravity capabilities to serve civil, national security, and commercial space customers. The Defense Tech segment develops and provides combat proven…
• VOYG (Voyager Technologies, Inc./DE)
• FY2025 10-K: …Stations segment and at the Corporate level. See Part II, Item 8, "Notes to Consolidated Financial Statements-Note 17. Segment Reporting" included elsewhere in this Annual Report. Years Ended December 31, (dollars in thousands) 2025 2024 Net Sales: Defense and National Security $ 122,954 $ 77,470 Space Solutions…
• FY2025 10-K: …segments. We currently lease additional office space and industrial facilities in the following locations: Location Related Segment Texas Space Solutions and Starlab Space Stations Nevada Defense and National Security California Defense and National Security Colorado Defense and National Security Ohio Space Solutions…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Karman Q1 2026 results, 2026 · Karman Q1 2026 segment results, 2026 · KeyBanc and Piper Sandler analyst notes, May 2026 · MarketBeat and TipRanks analyst consensus, 2026 · Karman 2026 guidance, 2026 · Karman Q1 2026 earnings call, 2026