Mercury Systems (MRCY) Stock Forecast & Price Target

Mercury Systems Inc. has demonstrated remarkable financial performance, with EBITDA margins increasing by 1,091% year-over-year to 13.1%, alongside a significant surge in free cash flow, rising by 356% year-over-year to reach $119 million. The company's topline growth has been driven by a notable 31% year-over-year increase in sales within its Modules and Sub-assembly product segment, achieving $246 million in FY25 and exhibiting an approximately 11% compound annual growth rate over the past two years. Additionally, Mercury’s strategic growth initiatives have enhanced its share-of-wallet in the defense electronics market, presenting opportunities for further margin expansion and sustained revenue growth.

Mercury Systems Inc. has experienced a significant decline in quarterly bookings, contracting at a compounded annual growth rate (CAGR) of 9.6% over a two-year period, with bookings dropping to approximately $200 million by Q3/25. This decline has adversely affected the company's book-to-bill ratio, which stood at 0.95x in Q3/25 and 1.10x on a trailing twelve-month basis, indicating a slowdown in demand relative to sales. Additionally, Mercury Systems' valuation is considerably lower than its small to mid-cap defense peers, lagging by 35.4% at a consensus EBITDA multiple of 31.5x for FY26, further signaling potential challenges ahead.