TransDigm Group Incorporated
TDG
$0.00
-0.53%
TransDigm Group Incorporated is a manufacturer and servicer of specialized aerospace parts for commercial and military aircraft. It operates as an acquisitive holding company focused on proprietary products with substantial aftermarket demand, leveraging its industry position through strategic acquisitions and financial leverage.…
TDG
TransDigm Group Incorporated
$0.00
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Investment Opinion: Should I buy TDG Today?
Based on a synthesis of the financial data, valuation, and market context, the objective assessment for TransDigm Group is a Hold. The company's underlying business strength is undeniable, characterized by world-class margins and a durable aftermarket model. However, the current combination of extreme leverage, premium valuation, and recent technical weakness suggests the stock is fairly valued at best in the near term. Investors should wait for a more attractive entry point or clearer signs of deleveraging before establishing new positions.
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TDG 12-Month Price Forecast
The analysis yields a neutral stance due to the powerful clash between exceptional business quality and concerning financial risk. The high confidence in the quality of the underlying assets is counterbalanced by medium confidence in the market's tolerance for its leverage in the current environment, leading to a balanced, wait-and-see outlook.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on TransDigm Group Incorporated's 12-month outlook, with a consensus price target around $0.00 and implied upside of — versus the current price.
Average Target
$0.00
7 analysts
Implied Upside
—
vs. current price
Analyst Count
7
covering this stock
Price Range
$0 - $0
Analyst target range
Analyst consensus data, such as a specific target price or ratings distribution (e.g., Buy/Hold/Sell), is not available in the provided inputs. The data shows six analysts provide estimates, with an average EPS estimate of $66.60 and an average revenue estimate of $13.119 billion. Recent institutional ratings include actions from firms like Keybanc (downgraded to Sector Weight), UBS (maintained Buy), and Morgan Stanley (maintained Overweight).
Bulls vs Bears: TDG Investment Factors
TransDigm is a high-quality business with exceptional margins and strong cash flow, operating in a resilient aerospace aftermarket. However, its investment case is heavily tempered by extreme financial leverage and premium valuation multiples. The recent sharp price decline reflects growing investor concern over these risks amidst a broader market pullback.
Bullish
- Exceptional Operating Margins: 47.2% operating margin and 60.1% gross margin indicate a highly profitable, proprietary business model.
- Strong Revenue Growth: Q1 2026 revenue grew 13.9% YoY, showing robust demand in aerospace aftermarket.
- High Free Cash Flow Generation: TTM free cash flow of $1.88B provides flexibility for acquisitions and debt servicing.
- Attractive Forward P/E: Forward P/E of 25.2 is significantly lower than trailing P/E of 37.0, implying expected earnings growth.
Bearish
- Extreme Financial Leverage: Negative D/E of -3.1 and negative ROE of -21.4% amplify risks in a downturn.
- High Valuation Multiples: Elevated P/S of 8.7 and EV/EBITDA of 22.8 leave little room for error.
- Recent Sharp Price Decline: Stock down 11% in 1 month and 12.9% in 3 months, underperforming the S&P 500.
- Sequential Earnings Decline: Net income fell from $610M in Q4 2025 to $386M in Q1 2026.
TDG Technical Analysis
Overall Assessment: The stock has experienced significant volatility over the past six months, with a peak near $1450 in January 2026 and a sharp decline to a recent low of $1132.88 in March 2026. The 6-month price change is -9.73%, indicating a negative trend, which has underperformed the S&P 500's -2.82% change over the same period.
Short-term Performance: The stock has declined sharply in the short term, with a 1-month change of -11.04% and a 3-month change of -12.85%. This recent weakness is highlighted by the price falling from $1427.54 on January 30, 2026, to $1158.96 by March 31, 2026.
Current Position: The current price of $1158.96 is near the lower end of its 52-week range of $1126.70 to $1623.83, representing approximately 28.7% above the 52-week low. No RSI data was provided for further momentum analysis.
Beta
0.95
0.95x market volatility
Max Drawdown
-30.1%
Largest decline past year
52-Week Range
$1124-$1624
Price range past year
Annual Return
-16.6%
Cumulative gain past year
| Period | TDG Return | S&P 500 |
|---|---|---|
| 1m | -12.0% | -4.3% |
| 3m | -14.1% | -4.0% |
| 6m | -9.5% | -2.0% |
| 1y | -16.6% | +22.2% |
| ytd | -14.1% | -3.8% |
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TDG Fundamental Analysis
Revenue & Profitability: The company's most recent quarterly revenue (Q1 2026) was $2.285 billion, showing a year-over-year growth of 13.91% compared to the same quarter the prior year. However, net income for Q1 2026 was $386 million, down from $610 million in the previous quarter (Q4 2025), indicating a sequential decline in profitability.
Financial Health: The company employs significant financial leverage, as evidenced by a negative debt-to-equity ratio of -3.10, which is a common structure for the firm. Cash flow generation remains strong, with free cash flow over the trailing twelve months reported at $1.878 billion.
Operational Efficiency: Return on Equity (ROE) is reported as -21.41%, which is negative, while Return on Assets (ROA) is a positive 11.78%. This disparity is largely driven by the high leverage and negative shareholder equity structure. The company maintains high operating and gross margins of 47.16% and 60.14%, respectively.
Quarterly Revenue
$2.3B
2025-12
Revenue YoY Growth
+0.13%
YoY Comparison
Gross Margin
+0.56%
Latest Quarter
Free Cash Flow
$1.9B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is TDG Overvalued?
Valuation Level: Given that Net Income is positive ($386 million in the latest quarter), the primary valuation metric used is the Price-to-Earnings (P/E) ratio. The trailing P/E ratio is 36.99, and the forward P/E ratio is 25.19, suggesting the market expects earnings growth.
Peer Comparison: Industry average valuation metrics were not provided in the data for a direct peer comparison. The company's Price-to-Sales (P/S) ratio is 8.69, and its Enterprise Value-to-EBITDA (EV/EBITDA) is 22.75, which are elevated levels typically associated with high-margin, proprietary business models.
PE
37.0x
Latest Quarter
vs. Historical
Low-End
5-Year PE Range 28x~85x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
22.8x
Enterprise Value Multiple
Investment Risk Disclosure
The primary risk for TransDigm is its capital structure. With a debt-to-equity ratio of -3.1 and substantial quarterly interest expenses ($475M in Q1 2026), the company is highly sensitive to rising interest rates and economic downturns that could pressure cash flows. This leverage, while a historical amplifier of returns, makes the equity particularly volatile, as seen in the recent 30% drawdown from its 52-week high.
Operational risks include exposure to the cyclical aerospace industry, though the proprietary aftermarket focus provides some insulation. Valuation risk is significant, with metrics like the P/S ratio of 8.7 and EV/EBITDA of 22.8 pricing in near-perfect execution. Any slowdown in revenue growth, margin compression, or a failed acquisition could trigger a severe multiple contraction. Furthermore, analyst sentiment shows mixed signals, with a recent downgrade to Sector Weight by Keybanc contrasting with maintained Buy/Overweight ratings from others, indicating uncertainty about near-term catalysts.
FAQ
The paramount risk is financial leverage, with a negative debt-to-equity ratio and $475 million in quarterly interest expense, making it vulnerable to rising rates and economic downturns. Valuation risk is also high, as any earnings miss could trigger a sharp multiple contraction. Furthermore, the stock has shown high volatility, with a 30% drawdown from its 52-week high and significant recent underperformance versus the broader market, indicating sensitivity to risk-off sentiment.
The 12-month forecast presents a range of scenarios. The base case (55% probability) sees the stock trading between $1,200 and $1,400, as strong fundamentals balance leverage concerns. The bull case (25%) targets a recovery to $1,400-$1,624 on multiple expansion and strong execution. The bear case (20%) risks a decline to the $1,127-$1,200 range if macro conditions worsen. The average analyst EPS estimate for the year is $66.60, which will be a key benchmark for performance.
TDG appears fairly valued to slightly overvalued based on traditional metrics. Its trailing P/E of 37.0 is high, though the forward P/E of 25.2 reflects expected earnings growth. The Price-to-Sales ratio of 8.7 and EV/EBITDA of 22.8 are elevated, typical for its high-margin model but leaving little room for error. The valuation is not egregious given the quality of the business, but it is not demonstrably cheap either, especially considering the leverage risk.
Based on current data, TDG is not an optimal buy for new capital. While the business model is excellent with 47.2% operating margins, the stock carries extreme financial leverage (Debt/Equity: -3.1) and trades at premium valuations (Forward P/E: 25.2, P/S: 8.7). The recent 11% one-month decline and underperformance versus the S&P 500 suggest investor caution. A more attractive entry point would be at a lower price that better compensates for these risks.
TDG is primarily suitable for long-term, risk-tolerant investors who can withstand significant volatility. The company's acquisitive, proprietary business model is built for compounding value over many years. However, the high leverage and beta near 1.0 make it a poor candidate for short-term trading or conservative portfolios. Investors must have a multi-year horizon to allow the underlying business strength to overcome periodic financial and market-related pressures.