Woodward
WWD
$374.91
-4.63%
Woodward, Inc. is an independent designer, manufacturer, and service provider of control solutions for the aerospace and industrial markets, producing critical components like fuel pumps, actuators, and flight deck controls for aircraft and industrial engines. The company is a key supplier and established player in the aerospace and defense supply chain, known for its high-performance, energy-efficient products that serve challenging environments. The current investor narrative is driven by a powerful cyclical recovery in the commercial aerospace sector, as evidenced by the company's recent quarterly revenue growth of 28.95% year-over-year, coupled with a series of analyst upgrades and a significant stock price re-rating reflecting optimism around sustained demand for new aircraft and aftermarket services.…
WWD
Woodward
$374.91
Investment Opinion: Should I buy WWD Today?
Rating & Thesis: Hold. Woodward is a high-quality play on the aerospace recovery with strong fundamentals, but its extreme valuation premium and cyclical positioning limit near-term upside and increase risk, warranting a neutral stance pending a better entry point or confirmation of sustained growth. This aligns with the bullish but limited analyst coverage, which lacks a specific consensus price target to gauge implied upside.
Supporting Evidence: The Hold rating is supported by four key data points: 1) A premium forward P/E of 37.77x, significantly above sector averages, 2) Exceptional revenue growth of 28.95% YoY, 3) Expanding profitability with a Q1 net margin of 13.42% and improving gross margins, and 4) Robust free cash flow generation of $409.7M TTM. However, the forward P/E exceeding the trailing P/E is a cautionary signal, and the PEG ratio of 1.75 suggests growth is already fairly priced.
Risks & Conditions: The two biggest risks are valuation compression and a cyclical growth slowdown. This Hold rating would upgrade to a Buy if the forward P/E compresses meaningfully below 30x on a pullback, or if next-quarter revenue growth accelerates further above 30% YoY while margins hold. It would downgrade to a Sell if revenue growth decelerates below 15% YoY or if gross margins contract sequentially. The stock is currently overvalued relative to its industrial peers and near the top of its own historical valuation range, pricing in a near-perfect execution of the aerospace cycle.
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WWD 12-Month Price Forecast
Woodward's fundamental trajectory is undeniably positive, powered by a robust aerospace recovery. However, the investment case is a classic clash between strong fundamentals and stretched valuation. The stock appears to have priced in much of the near-term good news, leaving limited margin for error. The stance is neutral, as the risk/reward at current levels is balanced. An upgrade to bullish would require either a meaningful pullback to improve the valuation entry point or clear evidence that the growth cycle will be longer and stronger than currently anticipated. A downgrade to bearish would be triggered by any material deceleration in the core growth metrics.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Woodward's 12-month outlook, with a consensus price target around $487.38 and implied upside of +30.0% versus the current price.
Average Target
$487.38
3 analysts
Implied Upside
+30.0%
vs. current price
Analyst Count
3
covering this stock
Price Range
$300 - $487
Analyst target range
Analyst coverage is limited but uniformly bullish, with only 3 analysts providing estimates, all of whom have issued Buy ratings according to recent institutional actions from firms like Deutsche Bank, Goldman Sachs, and UBS. The average revenue estimate for the forward period is $4.9 billion, with a tight EPS estimate range of $11.96 to $12.26 around an average of $12.11, though a specific consensus price target is not provided in the data, implying the implied upside must be derived from other metrics. The limited number of covering analysts suggests Woodward, despite its $22.4 billion market cap, may have lower institutional visibility than larger peers, which can contribute to higher volatility, but the unanimous bullish stance and recent flurry of reaffirmed Buy ratings in early 2026 indicate strong conviction in the near-term fundamental story.
Bulls vs Bears: WWD Investment Factors
The bull case, centered on explosive 28.95% YoY revenue growth, margin expansion, and strong cash flow from the aerospace recovery, currently holds stronger evidence given the concrete fundamental acceleration. However, the bear case, focused on an extreme valuation premium (34.05x trailing P/E) and cyclical peak risks, presents a formidable counter-argument. The single most important tension in the investment debate is whether Woodward's current growth trajectory can be sustained long enough to justify and grow into its premium valuation, or if the cycle will peak sooner than priced in, leading to a painful multiple compression. The stock's fate hinges on the duration and magnitude of this aerospace upcycle.
Bullish
- Explosive Revenue Growth: Revenue growth is accelerating sharply, with Q1 2026 revenue of $996.5 million representing a 28.95% year-over-year increase. This builds on the 16.7% YoY growth from the prior quarter, confirming a powerful multi-quarter uptrend driven by the commercial aerospace recovery.
- Profitability metrics are expanding impressively, with net income of $133.7 million in Q1 2026 and a net margin of 13.42%. Gross margin improved sequentially to 29.32% from 27.87%, demonstrating clear operating leverage as sales volumes increase.
- Robust Balance Sheet & Cash Flow: The company has a healthy balance sheet with a strong current ratio of 2.08 and a moderate debt-to-equity of 0.28. It is generating substantial free cash flow, with TTM FCF of $409.7 million, providing ample internal funding for growth and shareholder returns.
- Unanimous Analyst Conviction: Analyst coverage, though limited to 3 firms, is uniformly bullish with all issuing Buy ratings. This strong conviction, evidenced by recent reaffirmations from major banks, underscores confidence in the near-term fundamental story and the aerospace cycle.
Bearish
- Extreme Valuation Premium: The stock trades at a significant premium to its sector, with a trailing P/E of 34.05x and a forward P/E of 37.77x, well above typical Industrials averages in the low 20s. This high multiple leaves little room for error and is vulnerable to compression if growth falters.
- Cyclical Peak Positioning Risk: The current trailing P/E of 34.05x is near the top of its own multi-year range, indicating the stock is pricing in highly optimistic expectations for the current aerospace cycle peak. Any sign of a cyclical slowdown in orders or aftermarket demand could trigger a severe de-rating.
- Signs of Technical Exhaustion: The stock is trading at approximately 96% of its 52-week high, suggesting it is near peak momentum and may be susceptible to profit-taking. Recent price action shows consolidation, with only a 0.67% gain over the past month, indicating the explosive rally may be pausing.
- Limited Analyst Coverage & Visibility: Despite a $22.4 billion market cap, Woodward is covered by only 3 analysts. This lower institutional visibility can contribute to higher volatility and less liquidity, potentially amplifying price swings on any news.
WWD Technical Analysis
The stock is in a powerful, sustained uptrend, having appreciated 133.53% over the past year, and is currently trading at approximately 96% of its 52-week high of $403.31, indicating it is near peak momentum levels and may be susceptible to profit-taking. Recent momentum remains robust but shows signs of consolidation, with a 20.65% gain over the past three months and a more modest 0.67% gain over the past month, suggesting the explosive rally may be transitioning into a period of digestion or sideways action following the sharp move from the $300 level in January. Key technical support is anchored at the 52-week low of $162.85, while immediate resistance is the recent high of $403.31; a decisive breakout above this level could signal a continuation of the bull trend, while a breakdown below the recent consolidation range near $350 would suggest a deeper correction, with the stock's beta of 0.984 indicating market-like volatility appropriate for its sector.
Beta
0.98
0.98x market volatility
Max Drawdown
-18.5%
Largest decline past year
52-Week Range
$163-$407
Price range past year
Annual Return
+121.1%
Cumulative gain past year
| Period | WWD Return | S&P 500 |
|---|---|---|
| 1m | +2.1% | +4.6% |
| 3m | +12.6% | +1.4% |
| 6m | +51.5% | +5.6% |
| 1y | +121.1% | +33.5% |
| ytd | +20.6% | +2.9% |
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WWD Fundamental Analysis
Revenue growth is accelerating sharply, with Q1 2026 revenue of $996.5 million representing a 28.95% year-over-year increase, building on the strong 16.7% YoY growth seen in the prior quarter (Q4 2025 revenue of $995.3 million), indicating a robust multi-quarter uptrend primarily driven by the Aerospace segment which contributed $634.9 million of the total. Profitability is expanding impressively, with net income of $133.7 million in Q1 2026 and a net margin of 13.42%, up from 13.83% in the prior quarter, while gross margin improved sequentially to 29.32% from 27.87%, demonstrating operating leverage as sales volumes increase. The balance sheet is healthy with a strong current ratio of 2.08 and a moderate debt-to-equity ratio of 0.28, and the company is generating substantial cash, evidenced by trailing twelve-month free cash flow of $409.7 million, providing ample internal funding for growth initiatives and shareholder returns.
Quarterly Revenue
$996454000.0B
2025-12
Revenue YoY Growth
+0.28%
YoY Comparison
Gross Margin
+0.29%
Latest Quarter
Free Cash Flow
$409732000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is WWD Overvalued?
Given the company's positive net income, the primary valuation metric is the P/E ratio. The trailing P/E is 34.05x, while the forward P/E is 37.77x based on estimated EPS of $12.11; the higher forward multiple suggests the market is pricing in expectations for near-term earnings growth deceleration or a premium for visibility. Compared to sector averages, Woodward trades at a significant premium, with a trailing P/E of 34.05x versus a typical Industrials sector average in the low 20s, and a Price/Sales ratio of 4.22x that also exceeds sector norms, a premium arguably justified by its superior growth profile and margin expansion within the aerospace cycle. Historically, the current trailing P/E of 34.05x is near the top of its own multi-year range, which has fluctuated between the high-teens during the pandemic downturn and the mid-30s recently, indicating the stock is pricing in highly optimistic expectations for the current cycle peak.
PE
34.0x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 21x~57x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
22.7x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: Woodward's primary financial risk is its elevated valuation, which demands flawless execution and sustained high growth. A forward P/E of 37.77x implies significant earnings growth expectations; any deceleration from the current 28.95% YoY revenue growth rate could trigger a sharp de-rating. While the balance sheet is healthy (D/E of 0.28), the company's profitability, though improving, remains cyclical and tied to aerospace OEM production rates and aftermarket demand, introducing earnings volatility risk.
Market & Competitive Risks: The stock faces pronounced valuation compression risk, trading at a 34.05x trailing P/E versus a sector average likely in the low 20s. Its beta of 0.984 indicates market-like volatility, making it susceptible to broader market sell-offs or sector rotation out of industrials. Competitive risks include potential market share loss to larger aerospace suppliers or technological disruption in engine controls, though Woodward's established position mitigates this. The key external threat is a macroeconomic slowdown that delays aircraft deliveries or reduces flight hours, impacting the aftermarket segment.
Worst-Case Scenario: The worst-case scenario involves a combination of a cyclical downturn in aerospace, a broader market correction, and a failure to meet elevated earnings expectations. This could trigger a severe multiple compression towards historical lows and a decline in earnings estimates. A realistic downside could see the stock re-test its 52-week low of $162.85, representing a potential loss of approximately -58% from the current price of $388.48. A more probable adverse scenario, involving a growth scare and de-rating to a 25x P/E, could still imply a downside of -20% to -30%.
FAQ
The key risks are: 1) Valuation Risk: The extreme P/E premium (37.77x forward) is the primary risk, as any growth scare could cause a sharp multiple contraction. 2) Cyclical Risk: As a supplier to aerospace, WWD's fortunes are tied to the aircraft production cycle, which is inherently cyclical and may be nearing a peak. 3) Execution Risk: The market expects sustained high growth and margin expansion; failure to deliver could trigger analyst downgrades. 4) Market Risk: With a beta of 0.984, the stock is highly correlated to the broader market and would suffer in a general sell-off. The valuation and cyclical risks are currently the most severe.
The 12-month forecast presents three scenarios. The Base Case (55% probability) sees the stock trading between $350 and $403 as growth continues but the valuation premium slightly contracts. The Bull Case (25% probability) targets $403 to $450 if growth accelerates and the premium holds. The Bear Case (20% probability) warns of a decline to $250-$325 if growth decelerates and the multiple compresses sharply. The Base Case is most likely, assuming the aerospace recovery continues as planned but the stock's explosive re-rating phase is complete. The key assumption is that revenue growth remains robust but moderates from its current 28.95% pace.
WWD stock is overvalued on an absolute and relative basis. Its trailing P/E of 34.05x and forward P/E of 37.77x command a significant premium to the broader Industrials sector, which typically trades in the low 20s. Historically, its own P/E is also near the top of its multi-year range. This valuation implies the market expects several more years of robust earnings growth from the aerospace cycle without interruption. While the growth fundamentals are strong, the current price leaves little room for disappointment, making the stock vulnerable to de-rating if execution falters.
WWD is a good stock for investors who already have conviction in an extended aerospace upcycle and are comfortable paying a premium valuation for quality. The stock offers exposure to powerful 28.95% YoY revenue growth and strong cash flow generation. However, at a forward P/E of 37.77x, it is not a good buy for value-conscious investors or those concerned about cyclical peaks. The most attractive entry point would be on a market-driven pullback that reduces the valuation premium. The biggest downside risk is a growth slowdown triggering multiple compression, potentially leading to significant losses from current levels.
WWD is more suitable for a medium-term investment horizon (1-3 years) aligned with the current phase of the aerospace cycle. It is less ideal for long-term buy-and-hold due to its cyclical nature and premium valuation that may not be sustainable over a full cycle. It is also risky for short-term trading due to its market-like volatility (beta 0.984) and position near 52-week highs, which increases susceptibility to profit-taking. Investors should have a horizon that allows them to ride out potential volatility while the fundamental story plays out, but also be prepared to exit if signs of a cyclical downturn emerge.