What Does TransDigm Group Incorporated's (NYSE:TDG) Share Price Indicate?

By
Simply Wall St
Published
December 11, 2021
NYSE:TDG
Source: Shutterstock

TransDigm Group Incorporated (NYSE:TDG) saw significant share price movement during recent months on the NYSE, rising to highs of US$685 and falling to the lows of US$553. 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$605 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.

View our latest analysis for TransDigm Group

What's the opportunity in TransDigm Group?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 16% below my intrinsic value, which means if you buy TransDigm Group today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $724.72, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance 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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from TransDigm Group?

earnings-and-revenue-growth
NYSE:TDG Earnings and Revenue Growth December 11th 2021

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 more than double 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 around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on TDG, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - TransDigm Group has 2 warning signs we think you should be aware of.

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.

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