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This Defense Stock Is Up 113% This Year—Is It Still a Buy?
Written by Leo Miller. Published 9/17/2025.
Key Points
- Karman has had an explosive start to its stock market journey, already achieving more than double-bagger upside.
- Analysts at Raymond James think the stock still has a lot of room to run, projecting more than 50% upside.
- Karman's vertically integrated business is highly promising, but the stock's lofty valuation is also a cause for concern.
In 2025, mid-cap defense stock Karman (NYSE: KRMN) is quietly taking the market by storm.
As of the Sept. 15 close, KRMN is up nearly 113% year to date, marking the second-highest return among U.S. aerospace and defense stocks with market caps above $2 billion. Only Kratos Defense & Security Solutions (NASDAQ: KTOS) has outpaced it.
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Part of the reason Karman remains under the radar is its recent IPO. Following its February debut, shares surged 36% on day one, lifting its total 2025 advance to roughly 190%.
With this momentum, investors may wonder if the stock has already peaked. Raymond James disagrees, setting a $100 price target—implying about 57% upside from current levels.
So, what underpins KRMN's rapid rise, and does it still deserve a spot in investor portfolios?
A One-Stop Shop for Critical Missile and Space Systems
Karman builds mission-critical systems for prime defense contractors, focusing on missile and space programs. These are not plug-and-play components—without Karman's hardware and software, entire programs could falter.
Its end-to-end capabilities—from initial design through manufacturing—give clients a seamless, vertically integrated solution. This one-stop-shop model streamlines the supply chain, reducing complexity and enhancing reliability.
That efficiency shows up in the numbers. Gross margin reached nearly 41% in the latest quarter, placing Karman among the top five margins across U.S. defense firms with market caps above $2 billion.
Customer relationships are equally sticky. In 2023, 87% of Karman's revenue came from sole-source or single-source contracts. Sole-source agreements are awarded exclusively to Karman—often due to patent protections—while single-source deals reflect customer preference despite available alternatives. These long-term contracts underscore the unique, hard-to-replace nature of Karman's offerings.
Profitability, Growth, and a Backlog That Signals More Upside
Financially, Karman is showing robust progress. Revenue grew 35.3% year over year in Q2 2025, up from 18.5% growth in Q4 2024. Net income climbed 48% to $6.8 million, demonstrating that Karman is not only growing but already profitable on a GAAP basis—leaving plenty of room for margin expansion.
The company's funded backlog rose 36% to $719 million, providing strong visibility into future sales. That backlog is roughly 1.6 times Karman's projected 2025 revenue midpoint of $455 million, underscoring sustained demand for its solutions.
On the cash flow front, operating cash was negative $17.4 million last quarter, driven primarily by an $18 million increase in accounts receivable. In other words, Karman recorded revenue it has yet to collect in cash—common in defense contracting, where payment schedules can be uneven. Historically, the company's cash flow has been positive, making this a watch item rather than a red flag.
High Growth Meets High Valuation: What Comes Next?
The MarketBeat-tracked consensus price target on Karman is $60.60, implying a 5% downside from its $63.80 close on Sept. 15. No analyst besides Raymond James has a target above current levels.
Karman also trades at a lofty 123x forward price-to-earnings ratio. Still, if the company can sustain its revenue and backlog momentum, the market may reward further multiple expansion.
Overall, KRMN remains a high-quality, high-growth firm—but valuation suggests elevated risk at current prices. A significant pullback could present an attractive entry point for investors seeking exposure to defense and space systems.
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