Transdigm Group (TDG) AI Stock Analysis

• Market Cap: $74.33B
• Dividend Yield: N/A
• Average Volume (3M): 382.01K
• Price to Earnings (P/E): 42.3
• Beta (1Y): 0.81
• Revenue Growth: 11.33%
• EPS Growth: 25.37%
• Country: US
• Employees: 16,600
• Sector: Industrials
• Sector Strength: 72
• Industry: Aerospace & Defense
• EPS (TTM): 8.23
• Shares Outstanding: 56,473,564
• 10 Day Avg. Volume: 298,702
• 30 Day Avg. Volume: 382,006
• PEG Ratio: 1.47
• Price to Book (P/B): -7.92
• Price to Sales (P/S): 8.69
• P/FCF Ratio: 42.24
• Enterprise Value/Market Cap: 1.38
• Enterprise Value/Revenue: 11.23
• Enterprise Value/Gross Profit: 19.05
• Enterprise Value/Ebitda: 22.11
• 1Y Price Target: $1,608.07
• Price Target Upside: 22.17% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 16
• EPS Forecast (FY): 38.84
• Revenue Forecast (FY): $10.00B

• Rating: 65 Neutral
• Price Target: $1,400.00 ▲(6.36% Upside)
• Action: Downgraded Date: 02/04/26
• Date: Action: Downgraded 02/04/26

The score is driven primarily by strong operating profitability and cash flow, tempered by a highly leveraged, negative-equity balance sheet. The latest earnings call adds support via raised FY2026 guidance and strong liquidity, while technicals are weak (price below major moving averages) and valuation remains expensive (P/E ~41.9).

Positive Factors

High margins and profitability

TransDigm’s sustained TTM gross (~60%), operating (~35%) and net (~22%) margins reflect durable pricing power from proprietary aerospace components. These structurally high margins support resilience across cycles, fund reinvestment and M&A, and underpin long‑term cash returns.

Strong free cash flow & liquidity

Robust cash conversion (FCF ≈89% of net income, TTM FCF ~$1.9B) and quarter‑end cash >$2.5B provide durable liquidity. Reliable cash flows support interest service, fund targeted acquisitions and shareholder returns without immediate reliance on equity markets.

Proprietary, aftermarket model and M&A firepower

A roughly 50% aftermarket revenue mix and disciplined M&A pipeline (pending Stellant, Jet Parts, Victor Sierra; ~ $10B pro‑forma firepower) strengthen recurring, high‑margin aftermarket streams and expand proprietary product moats that persist beyond short cycles.

Negative Factors

Highly leveraged, negative equity balance sheet

A structurally high debt load (~$29.9B) and deeply negative equity (~-$9.3B) materially reduce financial flexibility. Elevated leverage heightens refinancing and interest‑rate sensitivity, constraining options during downturns and increasing the risk that cash flow volatility will impair strategic choices.

Acquisition‑related margin dilution & integration risk

Management disclosed ~200bps EBITDA dilution from recent/pending acquisitions and flagged integration/execution risk. Repeated M&A‑driven dilution can erode the company’s premium margins unless cost synergies and cross‑sell are realized, making margin sustainability contingent on execution.

Decelerating revenue growth and aftermarket lumpiness

Revenue growth has slowed to TTM ~3% from prior double‑digit years, while management notes aftermarket growth lags the broader market and distributor/airline inventory timing creates lumpiness. This increases top‑line volatility and complicates leverage and cash‑flow planning.

Transdigm Group Business Overview & Revenue Model

Company Description

TransDigm Group Incorporated designs, produces, and supplies aircraft components in the United States and internationally. Its Power & Control segment offers mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, batteries and chargers, databus and power controls, sensor products, switches and relay panels, hoists, winches and lifting devices, and cargo loading and handling systems. This segment serves engine and power system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies, and repair depots. The company's Airframe segment provides engineered latching and locking devices, engineered rods, engineered connectors and elastomer sealing solutions, cockpit security components and systems, cockpit displays, engineered audio, radio and antenna systems, lavatory components, seat belts and safety restraints, engineered and customized interior surfaces and related components, thermal protection and insulation products, lighting and control technology, and parachutes. This segment serves airframe manufacturers, cabin system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies, and repair depots. Its Non-aviation segment offers seat belts and safety restraints for ground transportation applications; electro-mechanical actuators for space applications; hydraulic/electromechanical actuators and fuel valves for land-based gas turbines; refueling systems for heavy equipment used in mining, construction, and other industries; and turbine controls for the energy and oil and gas markets. This segment serves off-road vehicle and subsystem suppliers, child restraint system suppliers, and satellite and space system suppliers; and manufacturers of heavy equipment. TransDigm Group Incorporated was founded in 1993 and is based in Cleveland, Ohio.

How the Company Makes Money

Transdigm Group generates revenue through the sale of its proprietary aerospace components and systems, which are often characterized by their high margins and low manufacturing costs. The company operates on a business model that emphasizes long-term customer relationships and recurring revenue streams, primarily from aftermarket sales. Approximately 50% of its revenue comes from aftermarket parts and services, including maintenance, repair, and overhaul (MRO) services for existing aircraft. Additionally, TDG's revenue is bolstered by its strategic acquisitions of niche companies with complementary product lines, enhancing its market presence and expanding its customer base. The company's relationships with major airlines, defense contractors, and government agencies further contribute to its stable revenue generation. By focusing on specialized products that are critical for aircraft operations, Transdigm can leverage its expertise to command premium pricing and maintain a strong competitive position in the aerospace industry.

Transdigm Group Financial Statement Overview

Summary

Profitability and cash generation are strong (TTM gross margin ~60%, operating margin ~35%, net margin ~22%; TTM FCF ~$1.9B and ~89% of net income), supporting debt service. However, the balance sheet meaningfully weakens the financial profile: very high debt (~$29.9B) versus assets (~$23.8B) and deeply negative equity (~-$9.3B) reduce flexibility, and recent revenue growth has decelerated (TTM ~3%).

Income Statement

TDG shows exceptionally strong profitability for the industry, with TTM (Trailing-Twelve-Months) gross margin near ~60% and net margin ~22%, supported by very high operating profitability (TTM operating margin ~35%). Revenue has continued to grow (TTM ~3% vs. 2024’s ~21% and 2023’s ~21%), but the trajectory is clearly decelerating versus the prior two years. Overall, the income statement is a major strength due to consistently elevated margins and solid earnings power, with the main watch-out being slower top-line growth recently.

Balance Sheet

The balance sheet is the weakest area. Total debt is very high (TTM ~$29.9B) versus total assets (~$23.8B), and shareholders’ equity remains deeply negative (TTM about -$9.3B), which reduces financial flexibility and raises refinancing/interest-rate sensitivity. While profitability is strong, the negative equity structure makes equity-based returns less meaningful and highlights leverage risk. In short: strong business, but a highly levered capital structure with thin balance-sheet cushioning.

Cash Flow

Cash generation is robust and relatively high quality. TTM operating cash flow is ~$2.1B and free cash flow is ~$1.9B, with free cash flow running at ~89% of net income, indicating earnings convert well into cash. Free cash flow growth is modestly positive TTM (~3%), though it was slightly negative in the most recent annual period, suggesting some variability. Cash flow strength is a key support for servicing the company’s sizable debt load, even if coverage is not consistently strong across periods.

Breakdown	TTM	Sep 2025	Sep 2024	Sep 2023	Sep 2022	Sep 2021
Income Statement
Total Revenue	9.11B	8.83B	7.94B	6.58B	5.43B	4.80B
Gross Profit	5.37B	5.31B	4.67B	3.84B	3.10B	2.51B
EBITDA	4.63B	4.57B	3.81B	3.15B	2.46B	2.03B
Net Income	1.97B	2.07B	1.71B	1.30B	866.00M	680.00M
Balance Sheet
Total Assets	23.76B	22.91B	25.59B	19.97B	18.11B	19.32B
Cash, Cash Equivalents and Short-Term Investments	2.53B	2.81B	6.26B	3.47B	3.00B	4.79B
Total Debt	29.92B	30.03B	24.90B	19.77B	19.81B	20.02B
Total Liabilities	33.02B	32.59B	31.87B	21.95B	21.87B	22.23B
Stockholders Equity	-9.27B	-9.69B	-6.29B	-1.98B	-3.77B	-2.92B
Cash Flow
Free Cash Flow	1.88B	1.82B	1.88B	1.24B	829.00M	808.00M
Operating Cash Flow	2.12B	2.04B	2.04B	1.38B	948.00M	913.00M
Investing Cash Flow	-1.54B	-595.00M	-2.44B	-900.00M	-553.00M	-785.00M
Financing Cash Flow	-525.00M	-4.90B	3.17B	-16.00M	-2.15B	-70.00M

Transdigm Group Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 1316.26
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TDG, the sentiment is Neutral. The current price of 1316.26 is above the 20-day moving average (MA) of 1308.85, below the 50-day MA of 1347.67, and below the 200-day MA of 1344.44, indicating a neutral trend. The MACD of -14.72 indicates Negative momentum. The RSI at 47.34 is Neutral, neither overbought nor oversold. The STOCH value of 55.15 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TDG.

Transdigm Group Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NOC	77 Outperform	$109.00B	24.91	26.17%	1.55%	-0.14%	72.35%
LHX	75 Outperform	$70.69B	42.76	8.20%	1.61%	2.83%	47.00%
GD	74 Outperform	$98.63B	23.10	17.66%	1.73%	11.86%	17.39%
HEI	74 Outperform	$38.92B	63.17	17.28%	0.07%	16.26%	33.72%
LMT	74 Outperform	$155.70B	30.63	76.87%	2.77%	2.88%	-35.15%
TDG	65 Neutral	$74.33B	42.31	―	―	11.33%	25.37%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%