Mercury Systems (MRCY) Stock Forecast & Price Target

Mercury Systems Inc has demonstrated significant financial improvement, with EBITDA margins increasing by 1,091% year-over-year to reach 13.1%, alongside a substantial 356% year-over-year growth in free cash flow, totaling $119 million. The company's topline growth has been bolstered by a notable 31% year-over-year increase in sales of Modules and Sub-assembly products, amounting to $246 million in FY25, supported by an impressive 11% two-year CAGR for this product segment. Additionally, the company's expanding share of the defense electronics market, driven by strategic inorganic growth, presents further opportunities for margin enhancement and sustained revenue growth.

Mercury Systems Inc. has experienced a significant decline in quarterly bookings, contracting at a compound annual growth rate (CAGR) of 9.6% from Q3/23 to Q3/25, leading to an approximate total of $200 million in bookings for Q3/25, which has adversely affected its book-to-bill ratio, recorded at 0.95x during that quarter. Additionally, the company's valuation remains behind its small to mid-cap defense peers, evidenced by its FY26 consensus EBITDA multiple of 31.5x, which is 35.4% lower than the peer group average of 48.8x. Moreover, revenue contributions from key segments like SCAR and ADTS have shown year-over-year declines, further highlighting challenges in revenue generation and overall market position.