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TransDigm Group Incorporated (NYSE:TDG): Is It A Smart Long Term Opportunity?

Ray Foley

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After TransDigm Group Incorporated’s (NYSE:TDG) earnings announcement on 29 December 2018, the consensus outlook from analysts appear somewhat bearish, with profits predicted to rise by 9.7% next year relative to the higher past 5-year average growth rate of 30%. Presently, with latest-twelve-month earnings at US$905m, we should see this growing to US$993m by 2020. Below is a brief commentary on the longer term outlook the market has for TransDigm Group. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

View our latest analysis for TransDigm Group

What can we expect from TransDigm Group in the longer term?

Over the next three years, it seems the consensus view of the 15 analysts covering TDG is skewed towards the positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To get an idea of the overall earnings growth trend for TDG, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

NYSE:TDG Past and Future Earnings, February 22nd 2019

By 2022, TDG’s earnings should reach US$1.3b, from current levels of US$905m, resulting in an annual growth rate of 11%. EPS reaches $20.09 in the final year of forecast compared to the current $16.28 EPS today. With a current profit margin of 24%, this movement will result in a margin of 28% by 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For TransDigm Group, I’ve compiled three essential aspects you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is TransDigm Group worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether TransDigm Group is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of TransDigm Group? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.