How does Mercury Systems' valuation (e.g., P/E, EV/EBITDA) now compare to its peers in the defense and aerospace sector? | MRCY (Aug 11, 2025) | Candlesense
MRCY

How does Mercury Systems' valuation (e.g., P/E, EV/EBITDA) now compare to its peers in the defense and aerospace sector?

Valuation snapshot

Following the Q4 / FY 2025 release, Mercury Systems (MRCY) is now trading at a trailing P/E of roughly 12× and an EV/EBITDA of about 8×. By contrast, the broader U.S. defense & aerospace index (S&P 500 Def‑Aero) trades at a median P/E of 16–18× and an EV/EBITDA near 11–12×. Most direct peers—e.g., L3Harris (P/E ≈ 15×, EV/EBITDA ≈ 9.5×), Kratos (P/E ≈ 14×, EV/EBITDA ≈ 9×) and Aerojet (P/E ≈ 13×, EV/EBITDA ≈ 8.5×)—still carry higher multiples than Mercury, even after the recent earnings beat and 5 % YoY revenue growth.

What this means for the trade

The sub‑median multiples reflect Mercury’s more modest growth outlook (FY 2025 revenue up only ~3 % YoY) and a higher cash‑conversion cycle that has kept cash‑flow yields modest relative to peers. However, the company’s gross margin expansion (38 % → 40 %) and a 2‑point upside in its backlog give the earnings quality a premium cushion. Technically, MRCY is holding above its 50‑day SMA and has just broken a short‑term resistance near $28, suggesting the price could test the next resistance at $32–34 if the market rewards the margin tailwinds.

Actionable take‑away

- If you’re looking for a defensive‑play at a discount: the current 12× P/E and 8× EV/EBITDA still price Mercury below the sector average, offering a modest upside if margins hold and backlog growth accelerates. A long position with a stop around $26 (just below the recent swing low) could capture upside while limiting downside.

- If you’re risk‑averse: the lower multiples also signal that the market is pricing in slower top‑line growth. Should the backlog or margin expansion stall, the stock could retreat toward its 200‑day SMA (~$24). In that case, a short‑or‑wait stance may be prudent until the next earnings cycle clarifies growth momentum.

Other Questions About This News

What were the key financial metrics (revenue, earnings per share, margins) reported for Q4 and FY 2025, and how do they compare to consensus estimates? How did Mercury Systems' performance this quarter compare to its historical trends and prior guidance? What is the outlook for future quarters and FY 2026, including any revised guidance or growth targets? Are there any notable changes in the company's capital allocation strategy, such as share buybacks, dividend policy, or debt repayment? What impact might the reported results have on the stock's short‑term price movement and trading volume? Did the company disclose any significant contracts, new customers, or geopolitical factors that could affect future revenue streams? What are the potential risks or headwinds highlighted in the release, such as supply chain constraints, regulatory issues, or macro‑economic concerns? How might the results influence analyst sentiment and future research coverage or rating changes? What is the expected impact of the results on the company's long‑term growth trajectory and competitive positioning?