Mercury Systems (MRCY) AI Stock Analysis

• Market Cap: $3.02B
• Dividend Yield: N/A
• Average Volume (3M): 663.79K
• Price to Earnings (P/E): ―
• Beta (1Y): 0.71
• Revenue Growth: 5.66%
• EPS Growth: 52.71%
• Country: US
• Employees: 2,364
• Sector: Industrials
• Sector Strength: 86
• Industry: Aerospace & Defense
• EPS (TTM): 0.06
• Shares Outstanding: 59,754,960
• 10 Day Avg. Volume: 818,441
• 30 Day Avg. Volume: 663,795
• PEG Ratio: 0.20
• Price to Book (P/B): 1.25
• Price to Sales (P/S): 0.00
• P/FCF Ratio: -32.58
• Enterprise Value/Market Cap: 0.82
• Enterprise Value/Revenue: 0.71
• Enterprise Value/Gross Profit: 10.63
• Enterprise Value/Ebitda: -31.48
• 1Y Price Target: $56.50
• Price Target Upside: 9.86% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 5

• Rating: 58 Neutral
• Price Target: $54.00 ▲(5.00%Upside)

The overall stock score reflects Mercury Systems' current financial pressures, despite significant improvements in cash flow and adjusted EBITDA as highlighted in the earnings call. The technical indicators suggest positive momentum, though valuation remains a concern with a negative P/E ratio. The most impactful factor is the financial performance, which shows strain due to declining revenue and profitability, affecting the overall score.

Positive Factors

Financial Performance

Mercury delivered another solid result with revenue exceeding consensus by $7.6 million.

Growth Strategy

The shift in bookings from development to production is seen as a meaningful driver to reaccelerate growth and drive operating leverage.

Market Positioning

Investors should consider owning Mercury as a clear play on defense modernization due to its critical role as a technology enabler for multiple platforms.

Negative Factors

Operational Risks

Confidence has materially improved that the long-dated turnaround story has officially turned the corner with business inflecting and technical risks on challenged programs eliminated.

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 is facing financial challenges with declining revenue and profitability, as indicated by a negative net profit margin and declining EBIT margin. While the balance sheet is solid with a reasonable debt level, the negative ROE and overall strained financial health are concerns. Cash flow is improving but remains a challenge.

Income Statement

Mercury Systems has faced challenges with declining revenue growth and profitability. The TTM (Trailing-Twelve-Months) shows a negative net profit margin of -10.23% and a declining EBIT margin. Gross profit margin stands at 24.32%, indicating operational challenges. The revenue has decreased from previous periods, which is a concern for future profitability.

Balance Sheet

The balance sheet reflects moderate leverage with a Debt-to-Equity ratio of 0.44, showing a reasonable level of debt. However, the Return on Equity (ROE) is negative, at -6.20%, indicating inefficiencies in generating returns for shareholders. The equity ratio is strong at 60.79%, showing a solid capital structure.

Cash Flow

Cash flow analysis reveals a recovering free cash flow, showing positive growth. The operating cash flow to net income ratio is not favorable due to negative net income, though operating cash flow is positive. The free cash flow growth rate indicates improvement, but overall cash generation remains a challenge.

Breakdown	TTM	Jun 2024	Jun 2023	Sep 2022	Sep 2021	Sep 2020
Income Statement
Total Revenue	887.48M	835.27M	973.88M	988.20M	924.00M	796.61M
Gross Profit	231.63M	195.90M	316.73M	394.96M	385.19M	356.84M
EBITDA	30.17M	-66.23M	73.95M	163.89M	163.28M	144.88M
Net Income	-65.05M	-137.64M	-28.34M	11.28M	62.04M	85.71M
Balance Sheet
Total Assets	2.41B	2.38B	2.39B	2.30B	1.96B	1.61B
Cash, Cash Equivalents and Short-Term Investments	269.82M	180.52M	71.56M	65.65M	113.84M	226.84M
Total Debt	646.82M	654.08M	578.30M	521.39M	271.51M	66.98M
Total Liabilities	963.33M	906.13M	824.68M	766.31M	470.99M	225.94M
Stockholders Equity	1.45B	1.47B	1.57B	1.54B	1.48B	1.38B
Cash Flow
Free Cash Flow	146.48M	26.09M	-60.05M	-46.52M	51.65M	71.89M
Operating Cash Flow	172.54M	60.38M	-21.25M	-18.87M	97.25M	115.18M
Investing Cash Flow	-21.45M	-34.29M	-38.56M	-274.32M	-416.89M	-135.49M
Financing Cash Flow	-24.29M	82.68M	65.43M	245.75M	206.23M	-10.93M

Mercury Systems Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 51.43
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MRCY, the sentiment is Neutral. The current price of 51.43 is below the 20-day moving average (MA) of 51.78, above the 50-day MA of 49.73, and above the 200-day MA of 43.15, indicating a neutral trend. The MACD of 0.57 indicates Positive momentum. The RSI at 48.96 is Neutral, neither overbought nor oversold. The STOCH value of 51.03 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for MRCY.

Mercury Systems Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
AVAV	76 Outperform	$11.25B	159.55	5.10%	―	14.50%	-29.76%
AIR	74 Outperform	$2.57B	246.75	-1.08%	―	21.07%	-120.95%
VSEC	74 Outperform	$2.65B	161.62	4.83%	0.31%	19.84%	-51.67%
KTOS	73 Outperform	$7.43B	353.60	1.45%	―	7.32%	―
Sector *	67 Neutral	€8.39B	18.63	6.19%	2.67%	2.39%	-39.55%
MRCY	58 Neutral	$3.02B	―	-4.45%	―	5.66%	52.71%
SPR	37 Underperform	$4.51B	―	81.63%	―	-2.91%	-109.95%

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.