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

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, Karman has notched a nearly 113% return on the year. That’s the second-highest year-to-date (YTD) return among all U.S. aerospace and defense stocks with market capitalizations above $2 billion. Only Kratos Defense & Security Solutions NASDAQ: KTOS tops Karman’s gain.

One factor contributing to the lack of attention surrounding Karman is that the stock is still very new to the market. Karman had its IPO back in February and rose 36% on its first day of trading. Including that first day rise, Karman’s 2025 moves up to a whopping 190%.

With the explosive price action, investors would be right to wonder whether all the gains in this stock have already been eaten up. Fortunately, one Wall Street analyst thinks that this is very far from the case. Raymond James recently placed a $100 price target on Karman, which implies shares could rise another 57%.

So, why is there so much excitement around this stock? Ultimately, is KRMN still a name that investors should consider adding to their portfolios?

A One-Stop Shop for Critical Missile and Space Systems

Karman supplies mission-critical systems for prime defense contractors, specifically working in missile and space programs. These are not auxiliary components—without Karman’s systems, entire programs risk failure.

Karman’s capabilities stretch all the way from the design phase to manufacturing. This vertical integration is another competitive advantage, making the firm a one-stop shop for its customers.

This integration helps win deals, as it improves supply chain efficiency for clients—something customers are willing to pay more for, which benefits Karman’s margins. Accordingly, Karman’s gross margin came in at nearly 41% last quarter, ranking in the top five among small-cap or larger U.S. defense stocks.

Karman customer relationships are sticky; it is hard for them to leave after beginning a program with the firm as switching vendors is costly and complex. In 2023, 87% of Karman’s revenue came through sole-source or single-source contracts, illustrating that customers view Karman’s capabilities as unique and difficult to replace. Sole-source denotes that Karman is the only company legally capable of fulfilling these contracts, often due to patent protection. Single-source denotes that customers choose to work only with Karman, despite potential alternatives. 

Profitability, Growth, and a Backlog That Signals More Upside

Financially, Karman has been putting up impressive figures. Revenue growth accelerated to 35.3% in Q2 2025, compared to 18.5% in Q4 2024. Karman’s net income also increased by 48% to $6.8 million. Overall, it is good to see that Karman is already profitable on a non-adjusted basis, and its low net income shows it still has significant room to grow its profits.

Karman’s funded backlog also grew by 36% to $719 million. This figure provides strong visibility into its future revenues, as customers have already appropriated this money to pay the company. Notably, the figure is around 1.6x higher than the $455 million in midpoint revenue Karman expects to generate in 2025.

On the negative side, Karman’s cash from operations (CFO) was negative $17.4 million. However, this was largely due to an $18 million increase in the company’s accounts receivable. In other words, Karman recorded a significant amount of revenue for which it has not received actual cash. This isn’t uncommon in the defense industry, as payouts can be lumpy. Karman’s CFO numbers are typically positive, making it something to watch but not an immediate concern.

High Growth Meets High Valuation: What Comes Next?

The MarketBeat-tracked consensus price target on Karman is $60.60, implying a 5% downside in shares.

Additionally, no analyst besides Raymond James has a price target on Karman above its nearly $63.80 closing price on Sept. 15.

Karman also trades at an extremely high 123x forward price-to-earnings (P/E). Still, it wouldn’t be surprising to see the stock continue to gain if its revenue and backlog growth remain near current levels.

Overall, even though Karman is a high-quality firm, it looks like somewhat of a high-risk bet at current prices. However, a substantial drawdown from current levels would make this name an enticing proposition.