TransDigm Gr (TDG:NYS) Fundamental Valuation Report

Fundamental Valuation Report

TransDigm Gr(TDG:NYS)

Industrials:Aerospace & Defense

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$343.13 (USD) 12/11/2018

Weighted Valuation
$408.33 (USD)

Overall Rating
Undervalued by 19.0%

Valuation Models Analyst Consensus: $408.33 (USD)
(in order of importance)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation

Company Overview (TDG:NYS USD)

Price 343.13
Range 341.95 – 356.97
52 week 263.08 – 375.54
Open 356.97
Vol / Avg. 609052/555511
Mkt cap 18.1B
P/E 21.08
Div/yield 0.00/0.00
EPS 16.20
Shares 52.75M
Beta 0.89

Company Description

TransDigm Group Inc manufactures products for electronic, power, fluid, and mechanical motion control onboard commercial and military aircraft and helicopters. It also supplies products used for cabin structures, lighting, laminates, pallets, and a host of other applications. The company’s businesses are organized and managed in three reporting segments: Power & Control, Airframe and Non-aviation.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for TDG:NYS

Using a discounted cash flow model we generated an intrinsic value of $617.14 (USD) for TDG:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

TDG:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $617.14 1% 5% 1% 5%
WACC (or Ke) 6.65 $818.30 $482.52
Terminal Growth Rate 1.60 $494.82 $799.90
Tax Rate 0.02 $659.37 $574.91
Cash Flow 2,368,194,400 $575.97 $658.32
Capital Expenditures 3,276,000 $617.19 $617.09
Long Term Debt 10,195,607,000 $626.81 $607.48

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $182.70 (USD) for TDG:NYS. We also generated a valuation of $352.17 (USD) using other metrics and comparables.
The comparable companies were Rockwell Collins (COL:NYS), Huntington Ingalls Indus (HII:NYS), Hexcel (HXL:NYS), L3 Technologies (LLL:NYS) and Spirit AeroSystems (SPR:NYS).

Company TDG:NYS End Date Value
Earnings/Share $16.20 (USD)
Book Value/Share ($39.79) (USD)
Sales/Share $66.53 (USD)
Cash Flow/Share $16.69 (USD)
EBITDA/Share $32.24 (USD)
Price Based on Comps Adjustment Factor (%)
$289.72 (USD) 26.2
$0.00 (USD) 15.5
$119.98 (USD) 0.0
$41.51 (USD) -77.0
$377.08 (USD) 25.4
TDG:NYS Ratios Used Average Values COL:NYS HII:NYS HXL:NYS LLL:NYS SPR:NYS
23.03 PE Ratio 17.88 21.02 16.12 17.68 17.93 16.67
0.00 PB Ratio 4.59 3.10 5.53 3.68 2.64 7.98
4.96 PS Ratio 1.80 2.46 1.27 2.46 1.50 1.32
19.79 PCF Ratio 16.37 20.29 11.07 13.23 19.14 18.12
16.34 EV to EBITDA 11.70 14.17 8.87 12.27 13.59 9.59

Multiples

Using a multiples approach we generated a valuation of  $441.89 (USD) for TDG:NYS

Company TDG:NYS End Date Value
Earnings/Share $16.20 (USD)
Book Value/Share ($39.79) (USD)
Sales/Share $66.53 (USD)
Cash Flow/Share $16.69 (USD)
EBITDA/Share $32.24 (USD)
Price Based on Comps Adjustment Factor
$558.50 (USD) 0
$0.00 (USD) 0
$317.30 (USD) 0
$355.10 (USD) 0
$536.65 (USD) 0
Ratios Ratio Average
PE Ratio 34.48
PB Ratio 9.55
PS Ratio 4.77
PCF Ratio 21.28
EV to EBITDA 16.65

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  TDG:NYS for the last 5 years was  5.99

We ran the Adjusted Book Value for  TDG:NYS and generated a book value of  ($34.29) (USD)
By multiplying these we get an adjusted valuation of  ($205.31) (USD)

Analyst Data

In the Stockcalc database there are 3 analysts that provide a valuation for TDG:NYS. The 3 analysts have a concensus valuation for TDG:NYS for 2019 of $408.33 (USD).

TDG:NYS TransDigm Gr

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
3 2 0 4.2000 Outperform 2018-11-9

Current Price: 343.13 USD

Analyst Consensus
USD Millions 2019 2020 2021
Mean EPS 16.94 18.60 21.01
# EPS Analysts 5 3 2
Mean Revenue 4,379.40 4,388.60 4,631.90
# Revenue Analysts 5 4 2
Mean Target Price 408.33
Mean Cash Flow 20.93 22.47 24.94
Mean EBITDA 2,101.70 2,209.60 2,330.90
Mean Net Income 952.30 1,043.70 1,139.70
Mean Debt Outstanding 10,100.40 9,987.70 9,809.30
Mean Tax Rate 21.50 22.00
Mean Growth Rate 14.26
Mean Capital Expenditure 93.10 87.10 91.90

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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