Karman Holdings (NYSE: KRMN) was initiated at Sell by BWS Financial with a price target of $37.

The analyst said Karman had benefited from strong demand tied to hypersonic and tactical missile programs as well as exposure to the space industry, which had driven backlog growth and investor expectations for multi-year revenue expansion. However, BWS Financial raised concerns over what it described as aggressive accounting practices that produced reported earnings without corresponding free cash flow generation.

The firm highlighted that unbilled revenue as a percentage of reported revenue had risen above 43%, while organic backlog growth had begun to slow. It added that Karman had relied on acquisitions to bolster backlog, increasing leverage in the process.

According to the analyst, the company's levered balance sheet, lack of free cash flow, and elevated valuation represented significant headwinds, particularly given that its private-equity sponsor had exited its entire position at $49 per share.