NOC  Northrop Grumman Corporation

Exchange

NYSE

Sector

Capital Goods

Industry

Industrial Machinery/Components

Market Cap.

48.98B

Vuru Grade

47.73/100

Current Price

$281.37
-0.18 (-0.06%)

Growth Price

$101.60
Overvalued by 63.89%

Stability Price

$41.54
Overvalued by 85.24%

Company Metrics

  • P/E 21.49
  • P/S 1.95
  • P/B 8.28
  • EPS 13.09
  • Cash ROIC 12.14%
  • Cash Ratio 0.45
  • Dividend 4 / 1.42%
  • Avg. Vol. 644,859.00
  • Shares 174.08M
  • Market Cap. 48.98B

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

Northrop Grumman: Problems With A Merger Now
Seeking Alpha - Sep 20, 2017
My investment thesis turned more negative on Northrop Grumman over the last year, especially as the stock jumped on North Korea missile threats and associated yields plunged.
Northrop Grumman to Acquire Orbital ATK for $9.2 Billion - PR Newswire (press release)
Checking the Overall Picture for Northrop Grumman Corporation (NOC) - StockNewsJournal
Northrop Grumman near deal for Orbital ATK - WSJ
Seeking Alpha - Sep 17, 2017
Orbital's (NYSE:OA) current market cap is about $6.3B. Northrop's (NYSE:NOC) market cap tops $45B. This deal, of course, comes soon after the announcement of another aerospace merger - UTX's $23B purchase of Rockwell Collins.
Northrop Grumman aims for space with $7.8-billion bid to buy Orbital ATK - Los Angeles Times
Northrop Grumman Announces Orbital ATK Buyout for $9.2B - Nasdaq
Better Buy: General Dynamics Corporation vs. Northrop Grumman
Motley Fool - Sep 18, 2017
Both General Dynamics (NYSE:GD) and Northrop Grumman (NYSE:NOC) have taken their share of projects resulting from the call for higher defense spending from the White House.
Seizert Capital Partners LLC Has $29.87 Million Position in Northrop Grumman ... - The Ledger Gazette
Northrop Grumman Corporation (NOC) Rises 3.35% for September 18 - Equities.com
Northrop Grumman Corporation (NOC) Downgraded by Zacks Investment Research to Hold
The Ledger Gazette - 21 hours ago
Zacks Investment Research lowered shares of Northrop Grumman Corporation (NYSE:NOC) from a buy rating to a hold rating in a research note released on Monday, September 18th.
Northrop Grumman's Unit Wins $125M Contract From US Navy - Nasdaq
Choosing Between Northrop Grumman Corporation (NOC) and Textron Inc. (TXT)? - Economic News
Northrop Grumman prepares for more cyber work in San Antonio
San Antonio Express-News (subscription) - Sep 13, 2017
Northrop Grumman won in 2014 the original contract to develop the platform, and announced last week it had won the recompete.
Northrop Grumman's Unit Wins Ship Navigation System Deal
Nasdaq - Sep 14, 2017
Defense major Northrop Grumman Corporation 's NOC business unit, Northrop Grumman Systems Corp., recently secured a modification contract worth $11 million, in relation to the Navy's WSN-7 navigation system.
3 Stocks to Watch on Monday: Equifax Inc. (EFX), FOSUN INTL NPV (FOSUF) and ...
Investorplace.com - Sep 18, 2017
3 Stocks to Watch on Monday: Equifax Inc. (EFX), FOSUN INTL Plenty of companies made moves over the weekend, as Equifax Inc. (NYSE:EFX), FOSUN INTL NPV (OTCMKTS:FOSUF) and Northrop Grumman Corporation (NYSE:NOC) all made headlines.
Northrop (NOC) Gets $18.6M Deal to Produce Torpedo for Navy
Nasdaq - Sep 22, 2017
Northrop Grumman CorporationNOC has secured a contract for producing array kits, production support material, related engineering and hardware repair services for MK 54 Mod 0 lightweight torpedo.
Return on Equity & Quant Signal Update for Northrop Grumman Corporation (NYSE:NOC)
Financial News Review - 12 hours ago
In reviewing some key ratios and quant data for Northrop Grumman Corporation (NYSE:NOC), we note that the mother of all ratios (Return on Equity) stands at 0.391789 for the firm.
Deals this week: CFM International, Huntington Ingalls Industries, Northrop ...
Naval Technology - Sep 15, 2017
... at Ingalls Shipbuilding's in Pascagoula, Mississippi, up to September 2018. Northrop Grumman Corporation has been awarded a deal worth roughly $57.7m for the full-rate production of software-programmable jammers for the US Navy until August 2022.
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.

$281.37 Current Price

$101.60 Growth Price (DCF)

Overvalued by 63.89%


Growth Rate Assumed by Market: 30.99%


Future Free Cash Flow Growth Rate: 0.5%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$41.54 Stability Price (EPV)

Overvalued by 85.24%


Discount Rate: 15.0%

$82.92 Book Price

Overvalued by 70.53%


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 $12.14 of cash for every $100 invested.
Figures in USD. Fiscal year ends in December
20122013201420152016
Free Cash Flow 2.31B 2.12B 2.03B 1.69B 1.89B
divided by
Invested Capital 16.63B 15.42B 16.82B 16.68B 17.44B
Cash ROIC 13.89% 13.75% 12.08% 10.14% 10.85%

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 $29.13 of Earnings for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in December
20122013201420152016
Net Income 1.98B 1.95B 2.07B 1.99B 2.20B
divided by
Stockholders' Equity 9.51B 10.62B 7.24B 5.52B 5.26B
Return on Equity 20.79% 18.38% 28.60% 36.04% 41.83%

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
2007200820092010201120122013201420152016
Free Cash Flow 2.21B 2.53B 1.48B 1.68B 1.63B 2.31B 2.12B 2.03B 1.69B 1.89B

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
2007200820092010201120122013201420152016
Cash 963.00M 1.50B 3.28B 3.70B 3.00B 3.86B 5.15B 3.86B 2.32B 2.54B
Current Assets 6.77B 7.19B 8.64B 9.90B 7.75B 8.39B 9.49B 8.18B 6.33B 6.86B
Total Assets 33.37B 30.20B 30.25B 31.42B 25.41B 26.54B 26.38B 26.57B 24.45B 25.61B
Current Liabilities 6.43B 7.42B 6.99B 8.39B 6.14B 6.06B 5.82B 5.89B 5.46B 5.63B
Total Liabilities 15.69B 18.28B 17.57B 17.86B 15.08B 17.03B 15.76B 19.34B 18.93B 20.36B
Stockholder' Equity 17.69B 11.92B 12.69B 13.56B 10.34B 9.51B 10.62B 7.24B 5.52B 5.26B
Current Ratio 1.05 0.97 1.24 1.18 1.26 1.39 1.63 1.39 1.16 1.22
TL-to-TA 0.47 0.61 0.58 0.57 0.59 0.64 0.60 0.73 0.77 0.79

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
2007200820092010201120122013201420152016
Retained Earnings 7.39B 5.59B 6.74B 8.25B 9.70B 11.14B 12.54B 12.39B 10.66B 10.63B
Retained Earnings Growth - -24.33% 20.52% 22.38% 17.63% 14.84% 12.57% -1.16% -13.97% -0.29%

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 $6.26 of every $100 of Revenue have been profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Net Income 1.79B -1.26B 1.69B 2.05B 2.12B 1.98B 1.95B 2.07B 1.99B 2.20B
divided by
Revenue 32.02B 33.89B 33.76B 34.76B 26.41B 25.22B 24.66B 23.98B 23.53B 24.51B
Net Profit Margin 5.59% -3.72% 4.99% 5.91% 8.02% 7.84% 7.92% 8.63% 8.46% 8.98%

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.

$28.69 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
2007200820092010201120122013201420152016
Gross Profit 6.21B 6.19B 5.63B 6.15B 26.41B 5.58B 5.38B 5.60B 5.64B 5.78B
divided by
Revenue 32.02B 33.89B 33.76B 34.76B 26.41B 25.22B 24.66B 23.98B 23.53B 24.51B
Gross Margin 19.41% 18.26% 16.66% 17.69% 100.00% 22.13% 21.81% 23.36% 23.98% 23.57%

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.

29.51% 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
2007200820092010201120122013201420152016
Capital Expenditure 685.00M 681.00M 654.00M 770.00M 488.00M 331.00M 364.00M 561.00M 471.00M 920.00M
divided by
Net Income 1.79B -1.26B 1.69B 2.05B 2.12B 1.98B 1.95B 2.07B 1.99B 2.20B
Capital Expenditure Ratio 38.27% -53.96% 38.79% 37.51% 23.04% 16.73% 18.65% 27.11% 23.67% 41.82%

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
2007200820092010201120122013201420152016
Dividend Paid 504.00M 525.00M 539.00M 545.00M 543.00M 535.00M 545.00M 563.00M 603.00M 640.00M
divided by
Shares Outstanding 354.30M 334.50M 323.30M 301.10M 281.60M 253.40M 233.90M 212.10M 191.60M 180.50M
Dividend Paid Per Share 1.42 1.57 1.67 1.81 1.93 2.11 2.33 2.65 3.15 3.55
Price at Year End 62.93 36.21 47.93 56.06 57.99 66.76 113.93 150.76 190.08 232.58
Dividend Yield 2.26% 4.33% 3.48% 3.23% 3.33% 3.16% 2.05% 1.76% 1.66% 1.52%

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
2007200820092010201120122013201420152016
Shares Outstanding 354.30M 334.50M 323.30M 301.10M 281.60M 253.40M 233.90M 212.10M 191.60M 180.50M
Stock Bought Back - 5.92% 3.46% 7.37% 6.92% 11.13% 8.34% 10.28% 10.70% 6.15%
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