Is TransDigm Group Incorporated (NYSE:TDG) Potentially Undervalued?

Simply Wall St · 3d ago

Today we're going to take a look at the well-established TransDigm Group Incorporated (NYSE:TDG). The company's stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$1,375 at one point, and dropping to the lows of US$1,239. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether TransDigm Group's current trading price of US$1,325 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at TransDigm Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for TransDigm Group

Is TransDigm Group Still Cheap?

TransDigm Group appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that TransDigm Group’s ratio of 45.21x is above its peer average of 31.65x, which suggests the stock is trading at a higher price compared to the Aerospace & Defense industry. But, is there another opportunity to buy low in the future? Given that TransDigm Group’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of TransDigm Group look like?

earnings-and-revenue-growth
NYSE:TDG Earnings and Revenue Growth March 13th 2025

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 59% over the next couple of years, the future seems bright for TransDigm Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? TDG’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe TDG should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on TDG for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for TDG, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about TransDigm Group as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 3 warning signs (2 are potentially serious!) that you ought to be aware of before buying any shares in TransDigm Group.

If you are no longer interested in TransDigm Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.