Mercury Systems (MRCY) AI Stock Analysis

• Market Cap: $4.08B
• Dividend Yield: N/A
• Average Volume (3M): 687.05K
• Price to Earnings (P/E): ―
• Beta (1Y): 0.72
• Revenue Growth: 9.19%
• EPS Growth: 72.88%
• Country: US
• Employees: 2,364
• Sector: Industrials
• Sector Strength: 84
• Industry: Aerospace & Defense
• EPS (TTM): 0.47
• Shares Outstanding: 59,915,670
• 10 Day Avg. Volume: 830,258
• 30 Day Avg. Volume: 687,047
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): N/A
• P/FCF Ratio: N/A
• Enterprise Value/Market Cap: 0.87
• Enterprise Value/Revenue: 3.87
• Enterprise Value/Gross Profit: 13.86
• Enterprise Value/Ebitda: 54.23
• 1Y Price Target: $64.33
• Price Target Upside: -5.94% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 10

• Rating: 59 Neutral
• Price Target: $71.00 ▲(3.82% Upside)

The overall stock score for Mercury Systems is primarily influenced by the positive sentiment from the recent earnings call, highlighting improvements in free cash flow and adjusted EBITDA. However, significant financial challenges, including negative profitability and valuation concerns, weigh heavily on the score. Technical analysis shows strong momentum, but the overbought condition suggests caution. The absence of corporate events and dividend yield further limits the stock's appeal.

Positive Factors

Defense Budget

Mercury Systems is recognized as a key provider of secure compute technology for major global defense systems, which are experiencing significant budget increases.

Revenue Growth

Mercury delivered a very strong quarter led by bookings of $341.5 million, or 20.1% growth, and revenue of $273.1 million (9.9% growth), exceeding consensus by $29.1 million or 11.8 percentage points of growth.

Valuation Potential

The company's trading multiple has lagged behind its peers, offering a discount that suggests potential value for investors.

Negative Factors

Guidance Uncertainty

The company did not provide guidance for fiscal 2026, instead opting to provide commentary suggesting low-single-digit revenue growth with the first half of the year relatively flat.

Operational Challenges

Strong results were driven by a pull forward of $30 million in programs that were expected to be delivered in the first half of fiscal 2026.

Procurement Scrutiny

The acquisition of Star Lab could help further differentiate Mercury’s offering, especially with increased scrutiny on procurement programs around cybersecurity.

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 generates revenue primarily through the sale of its advanced technology products and solutions to government and commercial customers within the aerospace and defense sectors. The company's key revenue streams include the sale of embedded processing modules, secure communications systems, and other specialized electronic systems that enhance the performance and security of military and aerospace operations. Additionally, Mercury Systems benefits from long-term contracts and partnerships with government agencies and defense contractors, which provide a stable and recurring revenue base. The company also invests in research and development to continually innovate and meet the evolving technological needs of its clients.

Mercury Systems Financial Statement Overview

Summary

Mercury Systems faces significant financial challenges, with negative profitability and declining cash flow metrics. While the debt level is moderate, the inability to generate positive returns and cash flow poses risks to financial stability. The company needs to address operational inefficiencies to improve its financial health.

Income Statement

Mercury Systems has experienced fluctuating revenue growth with a slight increase of 2.77% in the most recent year. However, profitability metrics are concerning, with negative net profit margins and EBIT margins indicating ongoing operational challenges. The company has struggled to maintain positive earnings, reflecting in negative EBIT and EBITDA figures.

Balance Sheet

The balance sheet shows a moderate debt-to-equity ratio, suggesting manageable leverage. However, the negative return on equity indicates that the company is not generating sufficient returns on shareholders' investments. The equity ratio is not calculable due to negative total assets, which is a significant concern.

Cash Flow

Cash flow analysis reveals a decline in free cash flow growth, with a negative trend in recent years. The operating cash flow to net income ratio is positive, indicating some ability to convert earnings into cash, but the overall cash flow position remains weak due to declining free cash flow.

Breakdown	TTM	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	912.02M	912.02M	835.27M	973.88M	988.20M	924.00M
Gross Profit	254.49M	254.49M	195.90M	316.73M	394.96M	385.19M
EBITDA	65.03M	-19.63M	-66.23M	73.95M	163.89M	163.28M
Net Income	-37.90M	-37.90M	-137.64M	-28.34M	11.28M	62.04M
Balance Sheet
Total Assets	2.43B	-10.52M	2.38B	2.39B	2.30B	1.96B
Cash, Cash Equivalents and Short-Term Investments	309.10M	-3.58M	180.52M	71.56M	65.65M	113.84M
Total Debt	644.24M	644.24M	654.08M	588.73M	532.63M	281.53M
Total Liabilities	961.30M	961.30M	906.13M	824.68M	766.31M	470.99M
Stockholders Equity	1.47B	1.47B	1.47B	1.57B	1.54B	1.48B
Cash Flow
Free Cash Flow	119.05M	138.85M	26.09M	-60.05M	-46.52M	51.65M
Operating Cash Flow	138.85M	138.85M	60.38M	-21.25M	-18.87M	97.25M
Investing Cash Flow	-13.50M	-13.50M	-34.29M	-38.56M	-274.32M	-416.89M
Financing Cash Flow	1.41M	1.41M	82.68M	65.43M	245.75M	206.23M

Mercury Systems Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 68.39
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Negative
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MRCY, the sentiment is Positive. The current price of 68.39 is above the 20-day moving average (MA) of 54.28, above the 50-day MA of 52.68, and above the 200-day MA of 45.64, indicating a bullish trend. The MACD of 2.61 indicates Negative momentum. The RSI at 81.96 is Negative, neither overbought nor oversold. The STOCH value of 85.33 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for MRCY.

Mercury Systems Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
AIR	79 Outperform	$2.80B	233.35	1.02%	―	19.91%	-73.61%
VSEC	77 Outperform	$3.41B	94.39	6.22%	0.24%	13.00%	120.90%
AVAV	68 Neutral	$12.36B	162.30	5.10%	―	14.50%	-29.76%
Sector *	63 Neutral	$10.83B	16.63	7.96%	2.06%	2.20%	-16.67%
KTOS	63 Neutral	$11.67B	741.85	0.88%	―	7.76%	40.33%
MRCY	59 Neutral	$4.08B	―	-2.57%	―	9.19%	72.88%
SPR	51 Neutral	$4.76B	―	81.63%	―	-2.60%	-94.76%

Mercury Systems Corporate Events

Mercury Systems COO Departs for CEO Role Elsewhere

On March 28, 2025, Charles R. Wells, IV, the Executive Vice President and Chief Operating Officer of Mercury Systems, announced his departure to assume a CEO role at a privately held company. Following his departure, William L. Ballhaus, the Chairman and CEO, will oversee business operations, while David E. Farnsworth, the Executive Vice President and CFO, will take on additional responsibilities, including leading a management operating system and overseeing technology investments. In recognition of his expanded role, Mr. Farnsworth will receive a restricted stock unit award valued at $1,000,000, with specific vesting terms tied to his continued service with the company.