November 30, 2023
Top 10 Stock TransDigm Strong Buy Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: TransDigm – Top 10 Stock in Dow Jones U.S. Aerospace & Defense Index
TransDigm is listed as a top 10 stock on November 30, 2023 in the market index D.J. US Defense because of its high performance in at least one of the Obermatt investment strategies. Two consolidated Obermatt Ranks are above-average. The company is growing above average and professional investor sentiment is positive. Both are encouraging signals for a stock purchase decision, albeit at an above-average share price. Based on the Obermatt 360° View of 75 (top 75% performer), Obermatt assesses an overall strong buy recommendation for TransDigm on November 30, 2023.
Snapshot: Obermatt Ranks
| Country | USA |
| Industry | Aerospace & Defense |
| Index | D.J. US Defense, S&P 500 |
| Size class | X-Large |
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° View TransDigm Strong Buy
| 360 METRICS | November 30, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 16 |
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| GROWTH | ||||||||
| GROWTH | 97 |
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| SAFETY | ||||||||
| SAFETY | 45 |
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| SENTIMENT | ||||||||
| SENTIMENT | 68 |
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| 360° VIEW | ||||||||
| 360° VIEW | 75 |
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ANALYSIS: With an Obermatt 360° View of 75 (better than 75% compared with alternatives) for 2023, overall professional sentiment and financial characteristics for the stock TransDigm are very positive. The 360° View is based on consolidating four consolidated indicators, with half of the metrics below and half above average for TransDigm. The consolidated Growth Rank has a good rank of 97, which means that the company experiences above-average growth momentum when looking at financial metrics such as revenue, profit, and invested capital growth as well as stock returns. This means that growth is higher than for 97% of competitors in the same industry. The consolidated Sentiment Rank also has a good rank of 68, which means that professional investors are more optimistic about the stock than for 68% of alternative investment opportunities. But the consolidated Value Rank has a less desirable rank of 16, which means that the share price of TransDigm is on the higher side compared with typical size in indicators such as revenues, profits, and invested capital. This means the stock price is higher than for 84% of alternative stocks in the same industry. Finally, the consolidated Safety Rank has a riskier rank of 45, which means that the company has a financing structure that is riskier than those of 55% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. ...read more
RECOMMENDATION: With a consolidated 360° View of 75, TransDigm is better positioned than 75% of all alternative stock investment opportunities based on the Obermatt Method. Only half of the consolidated Obermatt Ranks exhibit excellent performance, so one needs to take a close look. Growth is above-average (Growth Rank of 97), and professional market sentiment is positive (Sentiment Rank of 68), but value and safety are below average. The Safety Rank is the least significant of the four consolidated ranks, because it only reflects financing practices. In the case of high growth, aggressive financing is a good thing. So the question is: How to assess below-average value against above-average growth and sentiment? Growth may be the strongest driver of the investment rationale in this case, which is reflected in institutional investors' opinions. It is typical for growth companies to have low value, as is the case here. Investors are willing to pay more for companies that outperform their competitors. So the question is, how much do you sacrifice value for growth? You can use the following rule of thumb: If you take 100 minus the growth rank, you arrive at a possibly minimum level for the value rank. For example, if the growth rank is at 75, and the value rank is at 5, you should tread carefully. If the value rank is at 40, it still might be a good value if the growth rank is above 60. Sometimes market sentiment just extrapolates the past, but sometimes it reflects reality. You pay more than the market average for this stock, but it may be worth it. ...read more
Sentiment Strategy: Professional Market Sentiment for TransDigm positive
ANALYSIS: With an Obermatt Sentiment Rank of 68 (better than 68% compared with alternatives), overall professional sentiment and engagement for the stock TransDigm is above average. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for TransDigm. Analyst Opinions are at a rank of 84 (better than 84% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. In addition, Analyst Opinions Change has a rank of 84, which means that stock research experts are changing their opinions for the better in recommending investing in the company. In other words, they are getting even more optimistic about investments in TransDigm. Finally, the Professional Investors rank is 68, which means that currently, professional investors hold more stock in this company than in 68% of alternative investment opportunities. ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 68 (more positive than 68% compared with investment alternatives), TransDigm has a reputation among professional investors that is above-average compared with that of its competitors. Pros tend to favor investing in this company. But there is also a signal for caution. Market Pulse has a rank of 19, which means that the current professional news and professional social networks tend to be negative when discussing this company (more negative news than for 81% of competitors). This could mean future risks and should make investors careful. Attention to negative news for TransDigm is worthwhile because they may be early warning signals. Without those, all other professional signals are encouraging, especially since analysts are getting more optimistic. ...read more
Value Strategy: TransDigm Stock Price Value low
ANALYSIS: With an Obermatt Value Rank of 16 (worse than 84% compared with alternatives), TransDigm shares are significantly more expensive than comparable stocks. The Value Rank is based on consolidating four value indicators where three out of four are below average for TransDigm. Only the Price-to-Book Capital ratio (also referred to as market-to-book ratio) indicates good stock value with a Price-to-Book Rank of 97, which means that the stock price is lower compared with invested capital than for 97% of comparable investments. All other value indicators are below the market median. Price-to-Sales is 1 which means the stock price compared with what market professionals expect for future profits is higher than 99% of comparable companies, indicating a low value concerning TransDigm's revenue levels. The same is valid for the Price-to-Book Capital ratio (also referred to as market-to-book ratio) with a Price-to-Book Rank of 97 and for the dividend yields rank which is lower than for 99% of comparable companies, making the stock more expensive as regards to with the company's expected dividend payouts. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 16, is a sell recommendation based on TransDigm's stock price compared with the company's operational size and dividend yields. Why are market participants paying such a high price for TransDigm, where three out of four value indicators are below par? One reason could be that the company is well financed, indicated by the high book capital level, and has a promising future that is not yet visible in reported revenues and profits. That would also explain the low dividend yield because the company needs the cash to invest in its future. If investors can verify a picture in this sense, the stock may still be a good investment, even though current company-reported financials don't fully explain current stock prices. ...read more
Growth Strategy: TransDigm Growth Momentum high
| GROWTH METRICS | November 30, 2023 | |||||||
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| REVENUE GROWTH | ||||||||
| REVENUE GROWTH | 71 |
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| PROFIT GROWTH | ||||||||
| PROFIT GROWTH | 60 |
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| CAPITAL GROWTH | ||||||||
| CAPITAL GROWTH | 91 |
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| STOCK RETURNS | ||||||||
| STOCK RETURNS | 93 |
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| CONSOLIDATED RANK: GROWTH | ||||||||
| CONSOLIDATED RANK: GROWTH | 97 |
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ANALYSIS: With an Obermatt Growth Rank of 97 (better than 97% compared with alternatives) for 2023, TransDigm shows one of the highest growth dynamics in its industry. Investors also speak of high momentum. The Growth Rank is based on consolidating four value indicators, with all four indicators above average for TransDigm. Sales Growth has a value of 71, which means that, currently, professionals expect the company to grow more than 71% of its competitors. The same is valid for Profit Growth with a value of 60 and for Capital Growth with 91. In addition, Stock Returns had an above-average rank value of 93, which means they have been higher than 93% of comparable investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 97, is a buy recommendation for growth and momentum investors. Since all Growth Ranks are positive, TransDigm exhibits above-average growth momentum. This could be due to a uniquely strong market position, proprietary technology, or an extensive corporate acquisition strategy. Growth investors will find this an attractive investment opportunity, unless they expect that the current phase is transitory and will deteriorate in the future. The current performance could also be a temporary recovery from a very low point, such as a turn-around situation. In the case of a turn-around, the current performance may or may not be followed by a continuing positive development. ...read more
Safety Strategy: TransDigm Debt Financing Safety below-average
| SAFETY METRICS | November 30, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 4 |
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| REFINANCING | ||||||||
| REFINANCING | 34 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 100 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 45 |
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ANALYSIS: With an Obermatt Safety Rank of 45 (better than 45% compared with alternatives), the company TransDigm has financing practices on the riskier side, which means that their overall debt burden is above the industry average. This doesn't mean that the business of TransDigm is also risky, it only means that the company is on the riskier side in respect to bankruptcy in case things turn sour, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, with just one indicator above average for TransDigm. Liquidity is at 100, meaning the company generates more profit to service its debt than 100% of its competitors. This indicates that the company is safer when it comes to debt service. But Refinancing is riskier at a rank of 34, which means that the portion of the debt that is about to be refinanced is above average. It has more debt in the refinancing stage than 66% of its competitors. Leverage is also high at a rank of 4, which means that the company has an above-average debt-to-equity ratio. It has more debt than 96% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 45 (worse than 55% compared with alternatives), TransDigm has a financing structure that is riskier than that of its competitors. High Leverage (a low Obermatt Leverage Rank) is good in good times, because it usually indicates that shareholders get higher returns. The good Liquidity performance of the company is an indicator that this is the case. However, if you expect an economic downturn, you may stay clear of this stock because they have an above-average debt level that needs refinancing soon. ...read more
Combined financial peformance: TransDigm Above-Average Financial Performance
| COMBINED PERFORMANCE | November 30, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 16 |
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| GROWTH | ||||||||
| GROWTH | 97 |
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| SAFETY | ||||||||
| SAFETY | 100 |
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| COMBINED | ||||||||
| COMBINED | 67 |
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ANALYSIS: With an Obermatt Combined Rank of 67 (better than 67% compared with investment alternatives), TransDigm (Aerospace & Defense, USA) shares have above-average financial characteristics compared with similar stocks. Shares of TransDigm are low in value (priced high) with a consolidated Value Rank of 16 (worse than 84% of alternatives), and are riskily financed (Safety Rank of 45, which means above-average debt burdens) but show above-average growth (Growth Rank of 97). ...read more
RECOMMENDATION: A Combined Rank of 67, is a buy recommendation based on TransDigm's financial characteristics. As the company TransDigm shows low value with an Obermatt Value Rank of 16 (84% of comparable investments are less expensive), investors should look at the other ranks. In this case, growth is expected to be above-average, better than 97% of comparable companies (Obermatt Growth Rank is 97). This is a typical case. Companies with above average growth tend to cost more than stocks with slower growth expectations. If this is a high-growth company, the low Obermatt Safety Rank of 45 is a good sign. The more debt a well-performing company has, the higher the returns to shareholders. However, if growth turns negative or interest rates increase, high debt may become a burden. If you believe the future is bright for TransDigm, even a low-value company (in terms of its key financial indicators) can be a good investment. ...read more
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