This Defense Stock Is Up 113% This Year—Is It Still a Buy?

Core Viewpoint - Karman (NYSE: KRMN) is experiencing significant growth and attention in the defense sector, with a notable year-to-date return and strong financial performance, making it a potential investment opportunity [1][2][3]. Financial Performance - Karman has achieved a nearly 113% return year-to-date, ranking second among U.S. aerospace and defense stocks with market capitalizations above $2 billion [2]. - The company’s gross margin was nearly 41% last quarter, placing it in the top five among small-cap or larger U.S. defense stocks [5]. - Revenue growth accelerated to 35.3% in Q2 2025, compared to 18.5% in Q4 2024, with net income increasing by 48% to $6.8 million [8]. - Karman's funded backlog grew by 36% to $719 million, providing strong visibility into future revenues [9]. Market Position and Competitive Advantage - Karman supplies mission-critical systems for prime defense contractors, particularly in missile and space programs, which are essential for program success [4]. - The company benefits from vertical integration, enhancing supply chain efficiency and allowing it to command higher margins [5]. - In 2023, 87% of Karman's revenue came from sole-source or single-source contracts, indicating strong customer loyalty and unique capabilities [6][7]. Analyst Insights and Price Forecast - Raymond James has set a price target of $100 for Karman, suggesting a potential 57% upside from current levels [3]. - The consensus price target among analysts is $60.60, indicating a slight downside from the current price of $64.85 [11]. - Karman trades at a high forward price-to-earnings ratio of 123x, reflecting its growth potential but also indicating a high-risk investment at current prices [12].