Transdigm Group (TDG) AI Stock Analysis

• Market Cap: $78.33B
• Dividend Yield: N/A
• Average Volume (3M): 332.46K
• Price to Earnings (P/E): 46.4
• Beta (1Y): 0.92
• Revenue Growth: 12.86%
• EPS Growth: 11.44%
• Country: US
• Employees: 16,600
• Sector: Industrials
• Sector Strength: 78
• Industry: Aerospace & Defense
• EPS (TTM): 9.60
• Shares Outstanding: 56,350,285
• 10 Day Avg. Volume: 549,482
• 30 Day Avg. Volume: 332,458
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): N/A
• P/FCF Ratio: N/A
• Enterprise Value/Market Cap: 1.40
• Enterprise Value/Revenue: 13.04
• Enterprise Value/Gross Profit: 22.64
• Enterprise Value/Ebitda: 25.81
• 1Y Price Target: $1,635.20
• Price Target Upside: 16.99% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 16

• Rating: 68 Neutral
• Price Target: $1,544.00 ▲(10.46% Upside)

TransDigm Group's strong financial performance and positive earnings call sentiment are significant strengths, supported by robust profitability and strategic growth initiatives. However, high leverage and negative equity on the balance sheet, along with bearish technical indicators, present risks. The stock's reasonable valuation and potential for recovery from oversold conditions provide additional support for the score.

Positive Factors

Aftermarket Growth

TransDigm confirmed its commercial aerospace aftermarket growth guidance, with all submarkets experiencing growth, and engine aftermarket sales growing faster than non-engine sales.

Mergers and Acquisitions

TransDigm's management indicates a promising M&A pipeline with small to mid-sized targets, maintaining strategic growth potential.

Operational Efficiency

TransDigm’s impressive margin expansion continued as the adjusted EBITDA margin reached 54.4% in the quarter, driven by operational efficiencies and the higher mix of aftermarket revenue.

Negative Factors

Debt and Interest Expenses

The $5B debt-funded special dividend will increase TransDigm's net debt to EBITDA to just over 6x and add significant interest expenses.

Passenger Growth

Passenger growth in TransDigm's commercial aerospace aftermarket was below average last quarter, raising concerns about its performance in this segment.

Revenue Outlook

Shares of TransDigm traded down 12% after the company reported third-quarter results below consensus and lowered its full-year revenue outlook.

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 primarily through the sale of its proprietary aerospace components to original equipment manufacturers (OEMs) and aftermarket services. The company's revenue model is structured around both new part sales and aftermarket support, with a significant portion of earnings derived from long-term contracts and maintenance, repair, and overhaul (MRO) services. Key revenue streams include the sale of components used in aircraft production and the ongoing maintenance of existing aircraft fleets. Additionally, Transdigm benefits from strong relationships with major aerospace manufacturers and defense contractors, which provide a stable customer base and contribute to recurring revenue through aftermarket services. The company's focus on high-margin products and strategic acquisitions further enhances its profitability and market position.

Transdigm Group Financial Statement Overview

Summary

TransDigm Group shows robust profitability and growth, with strong margins and revenue growth. However, the balance sheet raises concerns due to high leverage and negative equity, which pose financial risks. Effective cash flow management provides a cushion, reflecting the company's ability to generate cash from operations.

Income Statement

The company demonstrates strong profitability with a robust gross profit margin at 59.0% and a net profit margin of 22.7% for TTM (Trailing-Twelve-Months). Revenue growth is impressive, showing a 5.6% increase in the current period compared to the previous year, which highlights a positive growth trajectory. EBIT and EBITDA margins stand at 46.0% and 50.5%, respectively, indicating efficient operational management and robust earnings potential. Overall, the income statement reflects a healthy and growing business with strong profitability metrics.

Balance Sheet

The balance sheet reveals a concerning financial structure with substantial leverage, as indicated by a negative stockholders' equity and a high debt-to-equity ratio. The equity ratio is negative due to the negative equity, signaling potential financial instability or risk. However, the company manages substantial assets and cash reserves, which provide some stability. Despite the negative equity, the company has shown the ability to generate strong profits, which could be leveraged to improve the financial position over time.

Cash Flow

Cash flow analysis indicates strong operational cash generation with an operating cash flow to net income ratio of 1.1, reflecting efficient conversion of earnings into cash. Free cash flow is solid, with a minor growth rate of 1.1%, and the free cash flow to net income ratio confirms adequate cash generation relative to net earnings. Despite the strong cash flow, negative investing cash flow and high financing outflows highlight the need for careful management of capital expenditures and debt obligations to maintain liquidity.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	8.39B	7.94B	6.58B	5.44B	4.80B	5.11B
Gross Profit	4.83B	4.56B	3.75B	2.94B	2.42B	2.55B
EBITDA	4.24B	3.87B	3.20B	2.46B	2.06B	2.08B
Net Income	1.72B	1.48B	1.26B	780.00M	607.00M	474.00M
Balance Sheet
Total Assets	21.91B	25.59B	19.97B	18.11B	19.32B	18.39B
Cash, Cash Equivalents and Short-Term Investments	2.43B	6.26B	3.47B	3.00B	4.79B	4.72B
Total Debt	25.05B	24.90B	19.77B	19.81B	20.02B	20.03B
Total Liabilities	27.57B	31.87B	21.95B	21.87B	22.23B	22.36B
Stockholders Equity	-5.67B	-6.29B	-1.98B	-3.77B	-2.92B	-3.97B
Cash Flow
Free Cash Flow	1.90B	1.88B	1.24B	829.00M	808.00M	1.11B
Operating Cash Flow	2.08B	2.04B	1.38B	948.00M	913.00M	1.21B
Investing Cash Flow	-2.46B	-2.44B	-900.00M	-553.00M	-785.00M	799.00M
Financing Cash Flow	-2.04B	3.17B	-16.00M	-2.15B	-70.00M	1.23B

Transdigm Group Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 1397.78
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TDG, the sentiment is Negative. The current price of 1397.78 is below the 20-day moving average (MA) of 1495.62, below the 50-day MA of 1499.92, and above the 200-day MA of 1377.97, indicating a neutral trend. The MACD of -40.01 indicates Positive momentum. The RSI at 35.14 is Neutral, neither overbought nor oversold. The STOCH value of 25.38 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TDG.

Transdigm Group Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
GD	79 Outperform	$84.38B	21.06	17.91%	1.85%	11.85%	16.12%
HEI	79 Outperform	$37.18B	71.97	16.34%	0.08%	17.74%	34.81%
LHX	78 Outperform	$50.62B	30.21	8.90%	1.73%	2.93%	43.29%
NOC	71 Outperform	$83.74B	21.50	26.50%	1.45%	-0.65%	77.20%
TDG	68 Neutral	$78.33B	46.40	-29.16%	―	12.86%	11.44%
LMT	64 Neutral	$102.15B	24.64	73.06%	2.96%	1.09%	-35.50%
Sector *	58 Neutral	HK$14.06B	4.84	-2.78%	5.73%	2.12%	-57.46%