TDG - Embedded Expectations Analysis - 2021 04 01
TransDigm Group Incorporated (TDG:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 30.4x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management appears concerned about free cash flow generation, commercial aerospace weakness, and the Cobham acquisitionSpecifically, management may lack confidence in their ability to improve free cash flow generation, sustain their current sales mix, and maintain low days sales outstanding (DSO) levels. In addition, they may have concerns about continued weakness in the commercial aerospace industry and wide-body aircraft market, disruptions to their 2021 outlook, and their capital allocation strategy. Furthermore, management may lack confidence in their ability to emerge stronger once markets recover, mitigate margin declines, and further reduce costs. Moreover, they may be concerned about the Cobham business sales mix and they may be exaggerating their progress on ESG initiatives. Finally, management may lack confidence in their ability to sustain growth in the defense business and translate their commercial aftermarket bookings into revenue
TransDigm Group is a holding company. Through its subsidiaries, the company designs, produces and supplies aircraft components for use on commercial and military aircraft. The company's segments are: Power and Control, which develops, produces and markets systems and components that provide power to or control power of the aircraft utilizing electronic, fluid, power and mechanical motion control technologies; Airframe, which develops, produces and markets systems and components that are used in non-power airframe applications utilizing airframe and cabin structure technologies; and Non-aviation, which develops, produces and markets products for non-aviation markets.
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