Mercury Systems (MRCY) AI Stock Analysis

• Market Cap: $4.74B
• Dividend Yield: N/A
• Average Volume (3M): 626.67K
• Price to Earnings (P/E): ―
• Beta (1Y): 1.07
• Revenue Growth: 8.63%
• EPS Growth: 72.72%
• Country: US
• Employees: 2,364
• Sector: Industrials
• Sector Strength: 72
• Industry: Aerospace & Defense
• EPS (TTM): 0.16
• Shares Outstanding: 60,014,633
• 10 Day Avg. Volume: 580,676
• 30 Day Avg. Volume: 626,670
• PEG Ratio: 1.14
• Price to Book (P/B): 2.13
• Price to Sales (P/S): 3.44
• P/FCF Ratio: 26.36
• Enterprise Value/Market Cap: 1.06
• Enterprise Value/Revenue: 5.31
• Enterprise Value/Gross Profit: 18.87
• Enterprise Value/Ebitda: 69.64
• 1Y Price Target: $92.50
• Price Target Upside: 17.13% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 7
• EPS Forecast (FY): 0.97
• Revenue Forecast (FY): $953.25M

• Rating: 55 Neutral
• Price Target: $92.00 ▲(16.50% Upside)
• Action: Reiterated Date: 02/05/26
• Date: Action: Reiterated 02/05/26

The score is held back primarily by weak profitability and poor near-term technicals (price below key moving averages). These are partially offset by solid cash generation and a constructive earnings call featuring strong bookings/backlog and improving adjusted EBITDA, but negative earnings and negative P/E keep the overall profile mid-range.

Positive Factors

Strong bookings and backlog growth

A near-$1.5B backlog and book-to-bill >1 provide multi-quarter revenue visibility typical of defense programs. This durable backlog supports production planning, steadier revenue conversion over time, and deeper program content with primes—reducing short-term demand risk.

Solid cash generation and improved leverage

Consistent positive operating and free cash flow, a sizeable cash balance and reduced net debt give the company financial flexibility to invest in R&D, support production ramps, fund sustainment, and absorb program timing variability without immediate capital raises.

Margin expansion trajectory and management targets

Measured improvement in adjusted EBITDA and explicit multi-year margin targets signal operational leverage potential. If management sustains cost controls and higher-margin wins, margins can structurally improve as lower-margin backlog converts and higher-value CPA and cybersecurity content scales.

Negative Factors

GAAP losses and negative margins

Persisting GAAP losses and negative net margins constrain retained earnings and long-term return on equity. Until sustainable GAAP profitability is restored, the company may face limitations on capital allocation, shareholder returns, and vulnerability to cost shocks despite improving adjusted metrics.

Gross margin compression and low-margin backlog mix

A persistent mix shift toward lower-margin backlog erodes unit economics and slows overall margin recovery. Even with rising revenue and bookings, prolonged low-margin program conversion can limit sustainable profitability and delay reaching the company's targeted adj. EBITDA levels.

Revenue seasonality and supplier/timing execution risk

Reliance on pull-forwards and supplier/material timing creates durable execution risk: revenue and cash flow can shift quarter-to-quarter, complicating production scheduling and visibility. Persistent supply timing uncertainty can slow backlog conversion and strain working capital management.

Mercury Systems Business Overview & Revenue Model

Company Description

Mercury Systems, Inc., a technology company, manufactures and sells components, products, modules, and subsystems for aerospace and defense industries in the United States, Europe, and the Asia Pacific. Its products and solutions are deployed in approximately 300 programs with 25 defense contractors and commercial aviation customers. The company offers components, including power amplifiers and limiters, switches, oscillators, filters, equalizers, digital and analog converters, chips, monolithic microwave integrated circuits, and memory and storage devices; modules and sub-assemblies, such as embedded processing modules and boards, switched fabric boards, digital receiver boards, multi-chip modules, integrated radio frequency and microwave multi-function assemblies, tuners, and transceivers, as well as graphics and video processing, and Ethernet and input-output boards; and integrated subsystems. It also designs and develops digital radio frequency memory units for various modern electronic warfare applications; radar environment simulation and test systems for defense and intelligence applications; and signals intelligence payloads and EO/IR technologies for small UAV platforms, as well as onboard UAV processor systems for real-time wide area motion imagery. The company was formerly known as Mercury Computer Systems, Inc. and changed its name to Mercury Systems, Inc. in November 2012. Mercury Systems, Inc. was incorporated in 1981 and is headquartered in Andover, Massachusetts.

How the Company Makes Money

Mercury Systems makes money primarily by selling defense electronics products and subsystems and by providing related services to aerospace and defense customers. Key revenue streams include: (1) Product sales of embedded and ruggedized computing modules, processing boards, and integrated subsystems used in defense platforms (e.g., sensor processing, electronic warfare, and mission computing). These products are typically sold to prime contractors and, in some cases, directly to government customers, often tied to specific defense programs and production ramps. (2) Program- and customer-funded engineering and services, where Mercury performs design, integration, customization, and lifecycle support (including test, sustainment, repairs, and upgrades) to adapt its technologies to a customer’s platform requirements and to keep fielded systems operational over time. (3) Revenue from acquired product lines and intellectual property that expand Mercury’s content on defense platforms, enabling the company to sell additional modules, subsystems, and support services across a broader set of programs. The company’s earnings are influenced by defense spending and program funding decisions, award timing and delivery schedules under customer contracts, long program lifecycles that can generate multi-year production and sustainment demand, and its position in supply chains serving major defense primes and government end-users. Specific partnership details beyond its role as a supplier to defense primes/government are null.

Mercury Systems Financial Statement Overview

Summary

Cash flow is a key support (TTM operating cash flow ~$122M and free cash flow ~$99M), and leverage appears manageable (debt-to-equity ~0.44). However, profitability remains the main drag with negative operating (~-6%) and net margins (~-8%) despite improvement versus 2024.

Income Statement

TTM (Trailing-Twelve-Months) revenue is essentially flat-to-slightly up versus the last annual period, but profitability remains weak: gross margin is ~27% while operating results are still negative (operating margin ~-6%) and net margin is ~-8%. The company has improved materially from 2024’s steep losses (net margin ~-16%), but it has not yet returned to sustained profitability seen earlier in the cycle (e.g., 2021 positive net income and stronger margins). Overall: improving trajectory off the 2024 trough, but earnings quality is still a clear headwind.

Balance Sheet

Leverage looks manageable for the industry, with debt-to-equity around 0.44 in TTM (Trailing-Twelve-Months) and equity of roughly $1.46B supporting a ~$2.50B asset base. However, returns are currently negative (TTM return on equity ~-4.7%) due to ongoing net losses. Overall: capital structure appears stable with moderate leverage, but the balance sheet is not translating into shareholder returns until profitability improves.

Cash Flow

Cash generation is a relative bright spot: TTM (Trailing-Twelve-Months) operating cash flow is ~$122M and free cash flow is ~$99M, both solidly positive despite net losses. That said, free cash flow is down sharply versus the prior annual period (free cash flow growth ~-39%), and cash flow is not fully keeping pace with accounting losses (free cash flow is slightly below the magnitude of net loss). Overall: good underlying cash generation, but volatility and the recent decline temper the strength.

Breakdown	TTM	Jun 2025	Jun 2024	Jun 2023	Jun 2022	Jun 2021
Income Statement
Total Revenue	942.54M	912.02M	835.27M	973.88M	973.88M	924.00M
Gross Profit	265.41M	254.49M	195.90M	316.73M	316.73M	385.19M
EBITDA	71.93M	65.03M	-66.23M	73.95M	73.95M	163.28M
Net Income	-30.41M	-37.90M	-137.64M	-28.34M	-28.34M	62.04M
Balance Sheet
Total Assets	2.50B	2.43B	2.38B	2.39B	2.30B	1.96B
Cash, Cash Equivalents and Short-Term Investments	334.99M	309.10M	180.52M	71.56M	65.65M	113.84M
Total Debt	674.72M	644.24M	654.08M	578.30M	521.39M	281.53M
Total Liabilities	1.04B	961.30M	906.13M	824.68M	767.23M	470.99M
Stockholders Equity	1.46B	1.47B	1.47B	1.57B	1.54B	1.48B
Cash Flow
Free Cash Flow	96.22M	119.05M	119.05M	26.09M	-60.05M	-46.52M
Operating Cash Flow	118.69M	138.85M	138.85M	60.38M	-21.25M	-18.87M
Investing Cash Flow	-18.06M	-13.50M	-13.50M	-34.29M	-38.56M	-274.32M
Financing Cash Flow	-10.10M	1.41M	1.41M	82.68M	65.43M	245.75M

Mercury Systems Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 78.97
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MRCY, the sentiment is Negative. The current price of 78.97 is below the 20-day moving average (MA) of 86.20, below the 50-day MA of 89.55, and above the 200-day MA of 72.05, indicating a neutral trend. The MACD of -1.96 indicates Positive momentum. The RSI at 39.35 is Neutral, neither overbought nor oversold. The STOCH value of 19.00 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for MRCY.

Mercury Systems Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MOG.A	74 Outperform	$9.81B	25.10	13.20%	0.46%	7.11%	13.43%
AMTM	67 Neutral	$6.60B	42.26	2.18%	―	―	―
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%
HXL	58 Neutral	$6.15B	53.70	7.41%	0.89%	-0.37%	-34.97%
MRCY	55 Neutral	$4.74B	-73.03	-2.08%	―	8.63%	72.72%
AVAV	53 Neutral	$10.78B	-21.68	-6.41%	―	79.89%	-171.81%