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Today we're going to take a look at the well-established TransDigm Group Incorporated (NYSE:TDG). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. The recent share price gains has brought the company back closer to its yearly peak. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at TransDigm Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for TransDigm Group
What's The Opportunity In TransDigm Group?
TransDigm Group appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that TransDigm Group’s ratio of 46.77x is above its peer average of 32.77x, which suggests the stock is trading at a higher price compared to the Aerospace & Defense industry. But, is there another opportunity to buy low in the future? Since TransDigm Group’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from TransDigm Group?
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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. TransDigm Group's earnings over the next few years are expected to increase by 59%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? TDG’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe TDG should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.