NOC  Northrop Grumman Corporation

Exchange

NYSE

Sector

Capital Goods

Industry

Industrial Machinery/Components

Market Cap.

51.45B

Vuru Grade

47.01/100

Current Price

$295.53
-0.84 (-0.28%)

Growth Price

$102.91
Overvalued by 65.18%

Stability Price

$54.60
Overvalued by 81.52%

Company Metrics

  • P/E 22.58
  • P/S 2.05
  • P/B 8.72
  • EPS 13.09
  • Cash ROIC 11.38%
  • Cash Ratio 1.61
  • Dividend 4 / 1.35%
  • Avg. Vol. 697,222.00
  • Shares 174.09M
  • Market Cap. 51.45B

Company Description

Northrop Grumman Corporation provides products, services, and solutions in aerospace, electronics, information systems, shipbuilding, and technical service sectors. Its company's Aerospace Systems segment offers manned and unmanned aircraft, spacecraft, high-energy laser systems, microelectronics, and other systems and subsystems in the areas of intelligence, surveillance, and reconnaissance; comm... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

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Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for NOC to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate NOC's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$295.53 Current Price

$102.91 Growth Price (DCF)

Overvalued by 65.18%


Growth Rate Assumed by Market: 34.09%


Future Free Cash Flow Growth Rate: 0.1%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$54.60 Stability Price (EPV)

Overvalued by 81.52%


Discount Rate: 15.0%

$123.02 Book Price

Overvalued by 58.37%


Satisfactory Cash Return on Invested Capital over the past 5 years

NOC has somewhat efficiently invested its financial resources in buildings, projects, and equipment. If CROIC is inconsistent, it's likely NOC could be benefiting from a one-time event or has a mixed history of investing capital productively. Read the company's Annual Report to determine whether this can improve.

NOC has created $11.38 of cash for every $100 invested.
Figures in USD. Fiscal year ends in December
20132014201520162017
Free Cash Flow 2.12B 2.03B 1.69B 1.89B 1.69B
divided by
Invested Capital 15.42B 16.82B 16.68B 17.44B 16.73B
Cash ROIC 13.75% 12.08% 10.14% 10.85% 10.07%

Excellent Return on Equity over the past 5 years

Over the past 5 years, NOC has generated strong profits with money shareholders have invested. This is considered one of the best indicators of quality management. Beware of extremely high Return on Equity (> 50%) as this is often unsustainable.

NOC has generated $30.69 of Earnings for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in December
20132014201520162017
Net Income 1.95B 2.07B 1.99B 2.20B 2.02B
divided by
Stockholders' Equity 10.62B 7.24B 5.52B 5.26B 7.05B
Return on Equity 18.38% 28.60% 36.04% 41.83% 28.59%

Excellent Business Performance over the past 10 years

NOC has been able to maintain profitability in good times and bad. This could mean NOC has an extremely strong business or has the ability to scale down costs when needed. This should be a fairly resilient business, but double check for future sustainability by looking at its Risk Factors in the Annual Report.

NOC has created positive free cash flow for 9 or more of the past 10 years.
Figures in USD. Fiscal year ends in December
2008200920102011201220132014201520162017
Free Cash Flow 2.53B 1.48B 1.68B 1.63B 2.31B 2.12B 2.03B 1.69B 1.89B 1.69B

Weak Balance Sheet

NOC's financial position is not ideal. The key is to check whether NOC is using debt to fuel its growth and the sustainability of that tendency. Highly capital intensive businesses (see Economic Moat) follow this route, which can deeply impact the future prospects of the business.
Figures in USD. Fiscal year ends in December
2008200920102011201220132014201520162017
Cash 1.50B 3.28B 3.70B 3.00B 3.86B 5.15B 3.86B 2.32B 2.54B 11.23B
Current Assets 7.19B 8.64B 9.90B 7.75B 8.39B 9.49B 8.18B 6.33B 6.86B 16.35B
Total Assets 30.20B 30.25B 31.42B 25.41B 26.54B 26.38B 26.57B 24.45B 25.61B 34.92B
Current Liabilities 7.42B 6.99B 8.39B 6.14B 6.06B 5.82B 5.89B 5.46B 5.63B 6.97B
Total Liabilities 18.28B 17.57B 17.86B 15.08B 17.03B 15.76B 19.34B 18.93B 20.36B 27.87B
Stockholder' Equity 11.92B 12.69B 13.56B 10.34B 9.51B 10.62B 7.24B 5.52B 5.26B 7.05B
Current Ratio 0.97 1.24 1.18 1.26 1.39 1.63 1.39 1.16 1.22 2.35
TL-to-TA 0.61 0.58 0.57 0.59 0.64 0.60 0.73 0.77 0.79 0.80

Consistent Reinvestment of Profits over the past 10 years

NOC has consistently retained profits. This may put NOC in a strong position to invest for the future, by buying new machinery, investing in R&D or a number of other options. By effectively using these earnings, NOC can greatly improve their long-term economic picture.
Figures in USD. Fiscal year ends in December
2008200920102011201220132014201520162017
Retained Earnings 5.59B 6.74B 8.25B 9.70B 11.14B 12.54B 12.39B 10.66B 10.63B 11.55B
Retained Earnings Growth - 20.52% 22.38% 17.63% 14.84% 12.57% -1.16% -13.97% -0.29% 8.64%

Competitive Industry over the past 10 years

NOC is likely operating in an industry with medium to low barriers to entry. This may mean that NOC doesn't have a characteristic that's hard to replicate, such as exclusive distribution, branding or the ability to keep costs low. If Gross Margins are at least satisfactory, it's likely that NOC invests heavily in R&D and Sales, General & Administrative expenses.

Only $6.48 of every $100 of Revenue have been profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2008200920102011201220132014201520162017
Net Income -1.26B 1.69B 2.05B 2.12B 1.98B 1.95B 2.07B 1.99B 2.20B 2.02B
divided by
Revenue 33.89B 33.76B 34.76B 26.41B 25.22B 24.66B 23.98B 23.53B 24.51B 25.80B
Net Profit Margin -3.72% 4.99% 5.91% 8.02% 7.84% 7.92% 8.63% 8.46% 8.98% 7.81%

Inconsistent Gross Profit Margins over the past 10 years

NOC has good gross profit margins, however inconsistency of these margins is a cause for concern. Look at reasons for this inconsistency to determine the likelihood of future sustainability.

$29.05 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2008200920102011201220132014201520162017
Gross Profit 6.19B 5.63B 6.15B 26.41B 5.58B 5.38B 5.60B 5.64B 5.78B 5.95B
divided by
Revenue 33.89B 33.76B 34.76B 26.41B 25.22B 24.66B 23.98B 23.53B 24.51B 25.80B
Gross Margin 18.26% 16.66% 17.69% 100.00% 22.13% 21.81% 23.36% 23.98% 23.57% 23.07%

Medium Capital Intensity over the past 10 years

NOC has used a reasonable amount of their financial resources to invest in facilities and equipment required to produce its goods and services. This isn't perfect, but it shouldn't be an area of concern unless this number is strongly trending upwards.

30.37% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in USD. Fiscal year ends in December
2008200920102011201220132014201520162017
Capital Expenditure 681.00M 654.00M 770.00M 488.00M 331.00M 364.00M 561.00M 471.00M 920.00M 928.00M
divided by
Net Income -1.26B 1.69B 2.05B 2.12B 1.98B 1.95B 2.07B 1.99B 2.20B 2.02B
Capital Expenditure Ratio -53.96% 38.79% 37.51% 23.04% 16.73% 18.65% 27.11% 23.67% 41.82% 46.05%

Very Strong Dividend History over the past 10 years

NOC has consistently distributed a dividend for at least the past 10 years. Such a long dividend history suggests NOC is very established in its market and that its dividend distribution is likely to continue for a significant period of time.
Figures in USD. Fiscal year ends in December
2008200920102011201220132014201520162017
Dividend Paid 525.00M 539.00M 545.00M 543.00M 535.00M 545.00M 563.00M 603.00M 640.00M 689.00M
divided by
Shares Outstanding 334.50M 323.30M 301.10M 281.60M 253.40M 233.90M 212.10M 191.60M 180.50M 175.60M
Dividend Paid Per Share 1.57 1.67 1.81 1.93 2.11 2.33 2.65 3.15 3.55 3.92
Price at Year End 36.21 47.93 56.06 57.99 66.76 113.93 150.76 190.08 232.58 247.45
Dividend Yield 4.33% 3.48% 3.23% 3.33% 3.16% 2.05% 1.76% 1.66% 1.52% 1.59%

Strong History of Stock Buybacks over the past 10 years

NOC has a strong history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in USD. Fiscal year ends in December
2008200920102011201220132014201520162017
Shares Outstanding 334.50M 323.30M 301.10M 281.60M 253.40M 233.90M 212.10M 191.60M 180.50M 175.60M
Stock Bought Back - 3.46% 7.37% 6.92% 11.13% 8.34% 10.28% 10.70% 6.15% 2.79%
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