Northrop Grumman is a defense contractor that is diversified across short-cycle and long-cycle businesses. The firm’s segments include aeronautics, mission systems, defense services, and space systems. I review Northrop Grumman’s business, look at its key ratios, and derive the intrinsic value using Discounted Cash Flow (DCF) analysis. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
I review various key ratios such as Revenue, Net Income, Shares outstanding, Dividends, Payout Ratio, Free Cash Flows (FCF), Financial Leverage, Current Ratio, Debt to Equity Ratio, Return on Equity (ROE), Days Sales Outstanding (DSO), Days Inventory, Payable Period, Cash Conversion Cycle, Inventory Turnover, etc.
After taking into account Northrop Grumman’s 2021 free cash flow of $2,152 million figure, a 8% growth rate of FCF (growth for the next 10 years), 10% discount rate, 2.949% long term growth rate (growth from 10 year mark in the future to perpetuity), 161 million shares outstanding, and $12,777 million of long term debt, the DCF analysis yields us an intrinsic value of $201.13 per share.
Timestamp
0:00 Introduction
0:27 Business Overview
8:14 Key Ratios Analysis
17:59 Discounted Cash Flow Analysis / Intrinsic Value
20:25 Conclusion
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References:
Northrop Grumman’s Website: here.
Morningstar Key Ratios Link: here.
Useful Resources here.
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