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Today we’re going to take a look at the well-established Northrop Grumman Corporation (NYSE:NOC). The company’s stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to $360.03 at one point, and dropping to the lows of $307.16. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Northrop Grumman’s current trading price of $334.36 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Northrop Grumman’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for Northrop Grumman
What is Northrop Grumman worth?
According to my valuation model, the stock is currently overvalued by about 38%, trading at US$334.36 compared to my intrinsic value of $242.37. This means that the opportunity to buy Northrop Grumman at a good price has disappeared! Furthermore, Northrop Grumman’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Can we expect growth from Northrop Grumman?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With profit expected to grow by 66.38% over the next couple of years, the future seems bright for Northrop Grumman. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in NOC’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe NOC should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.