TDG - Embedded Expectations Analysis - 2021 09 28
TransDigm Group Incorporated (TDG:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 29.3x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about their leverage position, the domestic travel recovery, and aircraft platform production shifts.Specifically, management may lack confidence in their ability to meet defense revenue growth targets, stay below their net debt to LTM EBITDA ratio target, and further improve their inventory position. In addition, they may have concerns about the persistent impact of coronavirus variants on pent-up travel demand, as well as the overall pace of domestic travel demand recovery. Moreover, management may lack confidence in their ability to capitalize on anticipated production rate ramps for narrow-body platforms and efficiently react to developments in aerospace and capital markets.
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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