General Dynamics Corporation
General Dynamics has rewarded its investors in the past 12 months after growing by 50% in market cap, but as it sits near all time highs, investors are wondering if it has the momentum to keep going. Looking at the company’s quarterly performance, it has impressively posted consistent growth in the past year, growing by as much as 18% in the last quarter. Demand for aerospace products and defense solutions has grown, especially with rising global tensions, which have boosted defense exports, especially aircrafts from the United States.
GD’s growth from its 52 week lows has brought its current price to earnings ratio to 23x (TTM). This places it on the more expensive side of the 15-25 range that traders look for, but it is far cheaper than the Aerospace & Defense Industry average of 37x.
GD has an opportunity to attract more buyers if they can grow their net income. They’ve grown their revenue consistently, but their profit margins haven’t grown along with it. Growing their net income will help lower their price to earnings ratio, making them more attractive to investors. Their projections look good for the next two quarters, with net income expected to grow by 41%, which will significantly improve their valuation if they meet forecasts.
Looking at the technical analysis:
GD has moved sideways for the past four months, with very little indication whether it will breakdown or not. The latest news about the Gulfstream G400 completing its first flight may help attract some attention to boost it above 297.50, but we expect the stock to continue to struggle until it breaks (and holds) 303.00. The rally they’ve formed since the August lows is a bit fragile, buying volume doesn’t indicate strength yet, so approach with caution.