NOC
Northrop Grumman Corporation
$537.96
Platform & Compounding FCF
70%
Two-stage FCF DCF
Moderate
·
Conviction
Overvalued
Trading 35.5% above fair value
You pay
$537.96
Bear
$306.50
Fair
$396.94
Bull
$476.74
Bear
$306.50
-43.0%
4% stage 1 growth, 11% discount
Fair
$396.94
-26.2%
6% stage 1 growth, 11% discount
Bull
$476.74
-11.4%
8% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (6% base case)
Terminal Value % of EV
35%
Implied Market Multiple
28.5x
Market is pricing in (growth)
13.7%
vs 6.0% base
Summary
Our base-case estimate uses a two-stage discounted cash flow model based on free cash flow. We then blend that result with the average analyst price target of $730.64 from 35 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $396.94 per share.
Warnings
Wall Street's average price target is $730.64 (from 35 analysts). Our estimate is 65% below the consensus -- consider that gap carefully.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions