Transdigm Group (TDG) AI Stock Analysis

• Market Cap: $82.33B
• Dividend Yield: N/A
• Average Volume (3M): 271.54K
• Price to Earnings (P/E): 49.3
• Beta (1Y): 0.95
• Revenue Growth: 14.90%
• EPS Growth: 17.50%
• Country: US
• Employees: 16,600
• Sector: Industrials
• Sector Strength: 90
• Industry: Aerospace & Defense
• EPS (TTM): 9.11
• Shares Outstanding: 56,167,084
• 10 Day Avg. Volume: 207,138
• 30 Day Avg. Volume: 271,539
• PEG Ratio: 9.39
• Price to Book (P/B): -14.96
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 43.14
• Enterprise Value/Market Cap: 1.27
• Enterprise Value/Revenue: 3.26
• Enterprise Value/Gross Profit: 21.15
• Enterprise Value/Ebitda: 6.55
• 1Y Price Target: $1,530.79
• Price Target Upside: 4.84% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 15

• Rating: 75 Outperform
• Price Target: $1,593.00 ▲(9.11%Upside)

TransDigm Group shows robust operational performance supported by strong profitability and cash flow management, despite a highly leveraged balance sheet. The stock demonstrates positive technical momentum, though valuation concerns arise from a high P/E ratio. Despite some challenges, the positive earnings call outlook and strategic focus provide a solid foundation for future growth, resulting in a favorable overall score.

Positive Factors

Financial Performance

TransDigm continues its impressive margin expansion, reaching a 54% adjusted EBITDA margin in the quarter, driven by cost initiatives taken in the first quarter and a higher mix of aftermarket sales.

Market Demand

Strong defense and aero A/M demand has been revealed, indicating robust market interest.

Operational Efficiency

Operational efficiency and flexibility position TransDigm to respond to uncertainty effectively.

Negative Factors

Margin Guidance

The reiterated guidance implies a second-half margin compression, which may have pressured shares, although the guide is likely conservative.

Revenue Performance

Second-quarter revenue was slightly below consensus on 7% organic growth.

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 to a wide range of customers, including aircraft manufacturers, airlines, and the military. The company focuses on products that have a high degree of aftermarket demand, which allows it to benefit from ongoing maintenance and replacement needs over the lifespan of an aircraft. Key revenue streams include original equipment manufacturing (OEM) sales, aftermarket sales, and military sales. A significant portion of its revenue is derived from aftermarket sales, which are highly profitable due to the proprietary nature of the parts and the critical role they play in aircraft operations. Additionally, Transdigm often engages in strategic acquisitions to enhance its product offerings and market reach, further bolstering its revenue potential.

Transdigm Group Financial Statement Overview

Summary

TransDigm Group exhibits strong profitability with impressive margins and revenue growth. However, a concerning balance sheet due to high leverage and negative equity poses potential risks, although strong cash flow management provides some stability.

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	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Income Statement		Total Revenue
8.39B	7.94B	6.58B	5.43B	4.80B	5.10B
	Gross Profit
4.95B	4.67B	3.84B	3.10B	2.51B	2.65B
	EBIT
3.86B	3.53B	2.92B	2.21B	1.69B	1.75B
	EBITDA
4.24B	3.87B	3.15B	2.46B	2.06B	2.05B
	Net Income Common Stockholders
1.90B	1.71B	1.30B	866.00M	680.00M	699.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
2.43B	6.26B	3.58B	3.00B	4.79B	4.72B
	Total Assets
21.91B	25.59B	19.97B	18.11B	19.32B	18.39B
	Total Debt
25.05B	24.90B	19.60B	19.81B	20.02B	20.01B
	Net Debt
22.62B	18.64B	16.13B	16.81B	15.23B	15.29B
	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: Positive
• Last Price: 1460.06
• 50DMA: Positive
• 100DMA: Positive
• 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 Positive. The current price of 1460.06 is above the 20-day moving average (MA) of 1436.97, above the 50-day MA of 1389.99, and above the 200-day MA of 1334.26, indicating a bullish trend. The MACD of 19.05 indicates Positive momentum. The RSI at 58.72 is Neutral, neither overbought nor oversold. The STOCH value of 70.33 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TDG.

Transdigm Group Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
HEI	80 Outperform	$36.64B	70.91	16.34%	0.07%	17.74%	34.81%
GD	79 Outperform	$74.21B	19.19	18.23%	2.08%	14.11%	17.65%
LMT	77 Outperform	$112.86B	20.81	82.55%	2.68%	3.12%	-15.29%
LHX	76 Outperform	$45.67B	28.95	8.49%	1.92%	5.39%	36.86%
TDG	75 Outperform	$82.33B	49.30	-29.16%	―	14.90%	17.50%
NOC	74 Outperform	$70.44B	19.26	25.41%	1.68%	0.61%	77.28%
Sector *	66 Neutral	$4.50B	12.29	5.40%	248.66%	4.13%	-12.33%