Mercury Systems (MRCY) Stock Forecast & Price Target

Mercury Systems Inc. has reported significant financial improvements, with EBITDA margins experiencing a remarkable year-over-year increase of 1,091% to 13.1%, and free cash flow soaring by 356% to $119 million. The company's revenues have benefited from a substantial 31% year-over-year growth in the sale of Modules and Sub-assembly products, totaling $246 million in FY25, alongside a consistent two-year compound annual growth rate of approximately 11% for this product segment. Additionally, Mercury's expanded footprint in the defense electronics market, facilitated by strategic inorganic growth, has created opportunities for both margin expansion and further revenue growth, positioning the company favorably within its industry.

Mercury Systems Inc has experienced a significant downturn in quarterly bookings, with a contraction of 9.6% CAGR projected through Q3/25, resulting in total bookings of approximately $200 million during that period and a declining book-to-bill ratio of 0.95x in Q3/25. Additionally, the company's valuation remains under pressure, as it lags 35.4% behind the SMID cap defense peer group multiple, standing at 31.5x FY26 consensus EBITDA compared to the peer average of 48.8x. Furthermore, the revenue contributions from key segments such as SCAR and ADTS have also shown a year-over-year decline, accentuating the challenges faced by the company in maintaining growth.