2024-06-14 13:37:42 ET
Summary
- Northrop Grumman stock continues to significantly underperform the defense sector and the broader market.
- In this article, I will discuss the reasons for the underperformance and why I believe a window of opportunity is beginning to open.
- In addition to operational fundamentals, a look at the balance sheet and growth prospects, I will also highlight some key risks of an investment in NOC shares.
- The article includes the results of my bottom-up discounted cash flow valuation, which identifies Northrop as a "great company at a reasonable price".
Introduction
As of late, shares of major defense contractor Northrop Grumman Corp. ( NOC ) can't seem to find a bottom. NOC is now almost back to the 52-week low of $415 and it will be interesting to see if support holds. As a long-term investor, I obviously don't put much weight on technicals, but watching some basic indicators has served me well nonetheless.
What concerns me much more is whether the current NOC share price could represent a solid opportunity to initiate a long-term position. My regular readers know that I consider it important to have portfolio exposure to defense companies. While I've added significantly to my holdings in RTX Corp. ( RTX ) and L3Harris Technologies, Inc. ( LHX ) over the past year, I haven't added to my third defense position - Lockheed Martin Corp. ( LMT ) - in quite some time. Since I'm more or less satisfied with the size of the three positions, I've been considering adding a fourth defense position for some time....
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For further details see:
Northrop Grumman: Why It's A Buy Despite Weakening Margins And Recent Setbacks