Kraken Robotics (TSXV:PNG) Valuation Check After $35 Million SeaPower Battery Sales News

Why Kraken Robotics stock is back on investor radar

Kraken Robotics (TSXV:PNG) has drawn fresh attention after announcing $35 million in SeaPower battery sales to three customers, tied to unmanned underwater vehicles used in defence, commercial, and marine research applications.

See our latest analysis for Kraken Robotics.

At a share price of CA$7.56, Kraken’s recent 24.75% 1 month share price return sits alongside an 11.34% year to date gain. Its very large 1 year total shareholder return suggests momentum has been strong, helped by the battery contract news and recent leadership hiring.

If this type of defence focused tech story interests you, it could be a good moment to cast the net wider and check out aerospace and defense stocks.

With Kraken trading around CA$7.56 and sitting slightly above the CA$7.50 analyst price target while reporting solid revenue and net income growth, is this surge already fully reflected in the price, or are markets still underpricing its future growth potential?

Price-to-Earnings of 140.7x: Is it justified?

Kraken is currently trading on a P/E of 140.7x, well above both its estimated fair P/E of 52.3x and its last close of CA$7.56.

The P/E ratio compares the share price with earnings per share, so a higher multiple usually means investors are pricing in stronger profit growth ahead.

For Kraken, a P/E that is much higher than its own fair P/E estimate of 52.3x suggests the market is paying a premium for its earnings profile, relative to what the fair ratio implies the level could move towards.

That premium also stands out against the North American Electronic industry, where the average P/E is 27.8x, and the peer group, where the average is 55.3x, so Kraken’s 140.7x multiple is materially richer than both comparisons.

Explore the SWS fair ratio for Kraken Robotics

Result: Price-to-Earnings of 140.7x (OVERVALUED)

However, you also need to weigh risks such as reliance on defence related spending and the possibility that high expectations embedded in a 140.7x P/E reset quickly.

Find out about the key risks to this Kraken Robotics narrative.

Another view: DCF points to a different conclusion

While the P/E of 140.7x suggests Kraken is expensive, our DCF model reaches a similar conclusion, with an estimated fair value of CA$6.97 compared with the current CA$7.56 price. That gap is not huge, but it does indicate you are paying above our fair value line. How comfortable are you paying a premium on both earnings and cash flows?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Kraken Robotics for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 872 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.

Build Your Own Kraken Robotics Narrative

If you see the numbers differently or prefer to test your own assumptions, you can build a personalised Kraken view in just a few minutes, starting with Do it your way.

A great starting point for your Kraken Robotics research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

Ready to spot your next opportunity?

If Kraken has your attention, do not stop here. Broaden your watchlist now so you are not looking back wishing you had checked other ideas earlier.

This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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