RTX Corp (RTX, Financial) has recently seen a daily gain of 6.37%, contrasting its 3-month loss of 18.95%. With an Earnings Per Share (EPS) of 3.77, the question arises - is the stock modestly undervalued? This article delves into a comprehensive valuation analysis of RTX (RTX), providing valuable insights for potential investors. Read on to understand the intrinsic value of this stock.
Company Overview
RTX Corp (RTX, Financial) is a diversified aerospace and defense industrial company, formed from the merger of United Technologies and Raytheon. It operates in three segments: Collins Aerospace, a diversified aerospace supplier; Pratt & Whitney, an aircraft engine manufacturer; and Raytheon, a defense prime contractor. With a stock price of $77.79 and a GF Value of $102.74, RTX appears to be modestly undervalued. This article aims to provide a deeper understanding of RTX's value, integrating financial assessment with essential company details.
Understanding the GF Value
The GF Value is an exclusive measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line represents the fair value at which the stock should ideally trade. If the stock's price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher. In RTX's case, the stock appears to be modestly undervalued, indicating that the long-term return of its stock is likely to be higher than its business growth.
Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. Hence, it's crucial to review a company's financial strength before investing. RTX's cash-to-debt ratio of 0.15 is worse than 75.51% of companies in the Aerospace & Defense industry. The company's overall financial strength is ranked 5 out of 10 by GuruFocus, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies carries less risk. RTX has been profitable 9 years over the past 10 years. With revenues of $70.60 billion and an Earnings Per Share (EPS) of $3.77 in the past 12 months, the company's operating margin of 8.51% is better than 58.78% of companies in the Aerospace & Defense industry. However, RTX's 3-year average revenue growth rate is worse than 71.32% of companies in the industry. Its 3-year average EBITDA growth rate is -8.1%, ranking worse than 68.83% of companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) is another way to determine its profitability. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, RTX's ROIC is 3.83, and its cost of capital is 7.73.
Conclusion
In conclusion, RTX (RTX, Financial) appears to be modestly undervalued. While the company's financial condition and profitability are fair, its growth ranks worse than 68.83% of companies in the Aerospace & Defense industry. For more information about RTX stock, check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
