Intrinsic value of TransDigm Group - TDG

Previous Close

$280.36

  Intrinsic Value

$94.81

stock screener

  Rating & Target

str. sell

-66%

  Value-price divergence*

-19%

Previous close

$280.36

 
Intrinsic value

$94.81

 
Up/down potential

-66%

 
Rating

str. sell

 
Value-price divergence*

-19%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of TDG stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 14.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  17.14
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
Revenue, $m
  3,171
  3,472
  3,786
  4,114
  4,454
  4,809
  5,177
  5,560
  5,957
  6,370
  6,800
  7,247
  7,711
  8,195
  8,698
  9,223
  9,770
  10,340
  10,934
  11,555
  12,203
  12,879
  13,587
  14,326
  15,100
  15,909
  16,756
  17,642
  18,571
  19,543
  20,562
Variable operating expenses, $m
 
  1,974
  2,101
  2,234
  2,372
  2,515
  2,664
  2,819
  2,980
  3,147
  3,321
  2,934
  3,122
  3,318
  3,522
  3,734
  3,956
  4,187
  4,427
  4,679
  4,941
  5,215
  5,501
  5,801
  6,114
  6,442
  6,785
  7,144
  7,519
  7,913
  8,326
Fixed operating expenses, $m
 
  54
  56
  57
  59
  60
  61
  63
  65
  66
  68
  70
  71
  73
  75
  77
  79
  81
  83
  85
  87
  89
  91
  94
  96
  98
  101
  103
  106
  108
  111
Total operating expenses, $m
  1,904
  2,028
  2,157
  2,291
  2,431
  2,575
  2,725
  2,882
  3,045
  3,213
  3,389
  3,004
  3,193
  3,391
  3,597
  3,811
  4,035
  4,268
  4,510
  4,764
  5,028
  5,304
  5,592
  5,895
  6,210
  6,540
  6,886
  7,247
  7,625
  8,021
  8,437
Operating income, $m
  1,268
  1,444
  1,630
  1,823
  2,024
  2,234
  2,451
  2,678
  2,913
  3,157
  3,411
  4,243
  4,518
  4,804
  5,102
  5,412
  5,735
  6,072
  6,424
  6,791
  7,175
  7,575
  7,994
  8,432
  8,890
  9,369
  9,871
  10,396
  10,945
  11,521
  12,125
EBITDA, $m
  1,389
  2,078
  2,270
  2,469
  2,677
  2,893
  3,118
  3,351
  3,594
  3,846
  4,108
  4,381
  4,664
  4,959
  5,267
  5,587
  5,921
  6,269
  6,632
  7,011
  7,407
  7,820
  8,252
  8,704
  9,177
  9,671
  10,189
  10,731
  11,298
  11,893
  12,516
Interest expense (income), $m
  449
  489
  450
  496
  544
  593
  645
  699
  755
  813
  873
  936
  1,001
  1,069
  1,139
  1,213
  1,289
  1,369
  1,452
  1,539
  1,630
  1,724
  1,823
  1,926
  2,034
  2,147
  2,265
  2,389
  2,518
  2,654
  2,796
Earnings before tax, $m
  768
  955
  1,180
  1,327
  1,481
  1,640
  1,806
  1,979
  2,158
  2,344
  2,538
  3,307
  3,517
  3,735
  3,962
  4,199
  4,446
  4,703
  4,972
  5,252
  5,545
  5,851
  6,171
  6,506
  6,856
  7,222
  7,605
  8,007
  8,427
  8,868
  9,329
Tax expense, $m
  182
  258
  319
  358
  400
  443
  488
  534
  583
  633
  685
  893
  950
  1,008
  1,070
  1,134
  1,200
  1,270
  1,342
  1,418
  1,497
  1,580
  1,666
  1,757
  1,851
  1,950
  2,053
  2,162
  2,275
  2,394
  2,519
Net income, $m
  586
  697
  861
  969
  1,081
  1,197
  1,319
  1,444
  1,575
  1,711
  1,853
  2,414
  2,567
  2,727
  2,892
  3,065
  3,245
  3,433
  3,629
  3,834
  4,048
  4,271
  4,505
  4,749
  5,005
  5,272
  5,552
  5,845
  6,152
  6,473
  6,810

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,587
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  10,726
  11,731
  12,792
  13,898
  15,049
  16,246
  17,490
  18,782
  20,126
  21,522
  22,973
  24,482
  26,052
  27,686
  29,387
  31,159
  33,005
  34,931
  36,939
  39,036
  41,225
  43,512
  45,902
  48,400
  51,013
  53,747
  56,608
  59,603
  62,739
  66,024
  69,465
Adjusted assets (=assets-cash), $m
  9,139
  11,731
  12,792
  13,898
  15,049
  16,246
  17,490
  18,782
  20,126
  21,522
  22,973
  24,482
  26,052
  27,686
  29,387
  31,159
  33,005
  34,931
  36,939
  39,036
  41,225
  43,512
  45,902
  48,400
  51,013
  53,747
  56,608
  59,603
  62,739
  66,024
  69,465
Revenue / Adjusted assets
  0.347
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
Average production assets, $m
  1,808
  1,979
  2,158
  2,345
  2,539
  2,741
  2,951
  3,169
  3,396
  3,631
  3,876
  4,131
  4,396
  4,671
  4,958
  5,257
  5,569
  5,894
  6,232
  6,586
  6,955
  7,341
  7,745
  8,166
  8,607
  9,068
  9,551
  10,056
  10,585
  11,140
  11,720
Working capital, $m
  2,178
  924
  1,007
  1,094
  1,185
  1,279
  1,377
  1,479
  1,585
  1,695
  1,809
  1,928
  2,051
  2,180
  2,314
  2,453
  2,599
  2,750
  2,908
  3,074
  3,246
  3,426
  3,614
  3,811
  4,017
  4,232
  4,457
  4,693
  4,940
  5,198
  5,469
Total debt, $m
  10,196
  9,377
  10,332
  11,327
  12,363
  13,440
  14,560
  15,723
  16,932
  18,189
  19,495
  20,853
  22,266
  23,736
  25,267
  26,862
  28,524
  30,257
  32,065
  33,951
  35,922
  37,980
  40,130
  42,379
  44,731
  47,191
  49,766
  52,462
  55,284
  58,240
  61,337
Total liabilities, $m
  11,378
  10,558
  11,513
  12,508
  13,544
  14,621
  15,741
  16,904
  18,113
  19,370
  20,676
  22,034
  23,447
  24,917
  26,448
  28,043
  29,705
  31,438
  33,246
  35,132
  37,103
  39,161
  41,311
  43,560
  45,912
  48,372
  50,947
  53,643
  56,465
  59,421
  62,518
Total equity, $m
  -651
  1,173
  1,279
  1,390
  1,505
  1,625
  1,749
  1,878
  2,013
  2,152
  2,297
  2,448
  2,605
  2,769
  2,939
  3,116
  3,301
  3,493
  3,694
  3,904
  4,123
  4,351
  4,590
  4,840
  5,101
  5,375
  5,661
  5,960
  6,274
  6,602
  6,946
Total liabilities and equity, $m
  10,727
  11,731
  12,792
  13,898
  15,049
  16,246
  17,490
  18,782
  20,126
  21,522
  22,973
  24,482
  26,052
  27,686
  29,387
  31,159
  33,006
  34,931
  36,940
  39,036
  41,226
  43,512
  45,901
  48,400
  51,013
  53,747
  56,608
  59,603
  62,739
  66,023
  69,464
Debt-to-equity ratio
  -15.662
  7.990
  8.080
  8.150
  8.220
  8.270
  8.320
  8.370
  8.410
  8.450
  8.490
  8.520
  8.550
  8.570
  8.600
  8.620
  8.640
  8.660
  8.680
  8.700
  8.710
  8.730
  8.740
  8.760
  8.770
  8.780
  8.790
  8.800
  8.810
  8.820
  8.830
Adjusted equity ratio
  -0.223
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  586
  697
  861
  969
  1,081
  1,197
  1,319
  1,444
  1,575
  1,711
  1,853
  2,414
  2,567
  2,727
  2,892
  3,065
  3,245
  3,433
  3,629
  3,834
  4,048
  4,271
  4,505
  4,749
  5,005
  5,272
  5,552
  5,845
  6,152
  6,473
  6,810
Depreciation, amort., depletion, $m
  121
  634
  640
  646
  653
  659
  666
  674
  681
  689
  697
  138
  147
  156
  165
  175
  186
  196
  208
  220
  232
  245
  258
  272
  287
  302
  318
  335
  353
  371
  391
Funds from operations, $m
  558
  1,331
  1,501
  1,615
  1,733
  1,857
  1,985
  2,118
  2,256
  2,400
  2,550
  2,552
  2,714
  2,882
  3,058
  3,240
  3,431
  3,630
  3,837
  4,054
  4,280
  4,516
  4,763
  5,021
  5,292
  5,574
  5,870
  6,180
  6,505
  6,845
  7,201
Change in working capital, $m
  -111
  80
  84
  87
  91
  94
  98
  102
  106
  110
  114
  119
  124
  129
  134
  140
  145
  152
  158
  165
  172
  180
  188
  197
  206
  215
  225
  236
  247
  259
  271
Cash from operations, $m
  669
  1,251
  1,417
  1,528
  1,643
  1,762
  1,887
  2,016
  2,151
  2,290
  2,435
  2,433
  2,590
  2,754
  2,924
  3,101
  3,286
  3,478
  3,679
  3,889
  4,107
  4,336
  4,575
  4,825
  5,086
  5,359
  5,645
  5,944
  6,258
  6,586
  6,930
Maintenance CAPEX, $m
  0
  -60
  -66
  -72
  -78
  -85
  -91
  -98
  -106
  -113
  -121
  -129
  -138
  -147
  -156
  -165
  -175
  -186
  -196
  -208
  -220
  -232
  -245
  -258
  -272
  -287
  -302
  -318
  -335
  -353
  -371
New CAPEX, $m
  -44
  -172
  -179
  -187
  -194
  -202
  -210
  -218
  -227
  -236
  -245
  -255
  -265
  -276
  -287
  -299
  -312
  -325
  -339
  -354
  -369
  -386
  -403
  -422
  -441
  -461
  -483
  -505
  -529
  -554
  -581
Cash from investing activities, $m
  -1,443
  -232
  -245
  -259
  -272
  -287
  -301
  -316
  -333
  -349
  -366
  -384
  -403
  -423
  -443
  -464
  -487
  -511
  -535
  -562
  -589
  -618
  -648
  -680
  -713
  -748
  -785
  -823
  -864
  -907
  -952
Free cash flow, $m
  -774
  1,019
  1,172
  1,269
  1,371
  1,476
  1,586
  1,700
  1,818
  1,942
  2,070
  2,049
  2,188
  2,331
  2,481
  2,637
  2,799
  2,968
  3,144
  3,327
  3,519
  3,718
  3,927
  4,145
  4,373
  4,611
  4,860
  5,121
  5,394
  5,679
  5,978
Issuance/(repayment) of debt, $m
  1,831
  -819
  955
  995
  1,036
  1,077
  1,120
  1,163
  1,209
  1,257
  1,306
  1,358
  1,413
  1,470
  1,531
  1,595
  1,662
  1,733
  1,808
  1,887
  1,970
  2,058
  2,151
  2,249
  2,352
  2,460
  2,575
  2,695
  2,823
  2,956
  3,097
Issuance/(repurchase) of shares, $m
  -178
  1,127
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,650
  308
  955
  995
  1,036
  1,077
  1,120
  1,163
  1,209
  1,257
  1,306
  1,358
  1,413
  1,470
  1,531
  1,595
  1,662
  1,733
  1,808
  1,887
  1,970
  2,058
  2,151
  2,249
  2,352
  2,460
  2,575
  2,695
  2,823
  2,956
  3,097
Total cash flow (excl. dividends), $m
  876
  1,326
  2,128
  2,265
  2,406
  2,553
  2,705
  2,863
  3,027
  3,198
  3,376
  3,408
  3,600
  3,802
  4,012
  4,231
  4,461
  4,701
  4,951
  5,214
  5,489
  5,776
  6,078
  6,394
  6,725
  7,071
  7,435
  7,816
  8,216
  8,635
  9,075
Retained Cash Flow (-), $m
  -387
  -1,824
  -106
  -111
  -115
  -120
  -124
  -129
  -134
  -140
  -145
  -151
  -157
  -163
  -170
  -177
  -185
  -193
  -201
  -210
  -219
  -229
  -239
  -250
  -261
  -273
  -286
  -299
  -314
  -328
  -344
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -498
  2,022
  2,154
  2,291
  2,433
  2,581
  2,734
  2,893
  3,058
  3,231
  3,257
  3,443
  3,638
  3,842
  4,054
  4,276
  4,508
  4,751
  5,004
  5,270
  5,548
  5,839
  6,144
  6,463
  6,798
  7,149
  7,517
  7,902
  8,307
  8,731
Discount rate, %
 
  13.40
  14.07
  14.77
  15.51
  16.29
  17.10
  17.96
  18.86
  19.80
  20.79
  21.83
  22.92
  24.06
  25.27
  26.53
  27.86
  29.25
  30.71
  32.25
  33.86
  35.55
  37.33
  39.20
  41.16
  43.22
  45.38
  47.65
  50.03
  52.53
  55.16
PV of cash for distribution, $m
 
  -439
  1,554
  1,425
  1,287
  1,144
  1,001
  860
  726
  602
  489
  371
  289
  221
  164
  119
  84
  57
  38
  25
  15
  9
  5
  3
  2
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

TransDigm Group Incorporated designs, produces, and supplies aircraft components in the United States. The company’s Power & Control segment provides mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, databus and power controls, hoists, winches and lifting devices, and cargo loading and handling systems. This segment serves engine and power system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies, and repair depots. Its Airframe segment offers engineered latching and locking devices, rods and locking devices, engineered connectors and elastomers, cockpit security components and systems, aircraft audio systems, lavatory components, seat belts and safety restraints, engineered interior surfaces and related components, lighting and control technology, military personnel parachutes, and cargo delivery systems. This segment serves airframe manufacturers, cabin system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies, and repair depots. The company’s Non-aviation segment provides seat belts and safety restraints for ground transportation applications; mechanical/electro-mechanical actuators and controls for space applications; and refueling systems for heavy equipment. It serves off-road vehicle and subsystem, child restraint system, and satellite and space system suppliers; and manufacturers of heavy equipment. The company also offers aerospace pneumatic and hydraulic components and subsystems for commercial transport, regional, business jet, and military applications; extruded plastic interior parts for use in the commercial aerospace industry; faucets and related products for use on commercial transports and regional jets; and unit load devices. TransDigm Group Incorporated was founded in 1993 and is based in Cleveland, Ohio.

FINANCIAL RATIOS  of  TransDigm Group (TDG)

Valuation Ratios
P/E Ratio 25.5
Price to Sales 4.7
Price to Book -23
Price to Tangible Book
Price to Cash Flow 22.3
Price to Free Cash Flow 23.9
Growth Rates
Sales Growth Rate 17.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -20%
Cap. Spend. - 3 Yr. Gr. Rate 4.1%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity -1527.3%
Total Debt to Equity -1566.2%
Interest Coverage 3
Management Effectiveness
Return On Assets 9.8%
Ret/ On Assets - 3 Yr. Avg. 9.2%
Return On Total Capital 7%
Ret/ On T. Cap. - 3 Yr. Avg. 6.4%
Return On Equity -69.4%
Return On Equity - 3 Yr. Avg. -45.4%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 55.5%
Gross Margin - 3 Yr. Avg. 54.6%
EBITDA Margin 42.2%
EBITDA Margin - 3 Yr. Avg. 40.1%
Operating Margin 40%
Oper. Margin - 3 Yr. Avg. 39.6%
Pre-Tax Margin 24.2%
Pre-Tax Margin - 3 Yr. Avg. 22.2%
Net Profit Margin 18.5%
Net Profit Margin - 3 Yr. Avg. 16%
Effective Tax Rate 23.7%
Eff/ Tax Rate - 3 Yr. Avg. 28.4%
Payout Ratio 0.5%

TDG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TDG stock intrinsic value calculation we used $3171 million for the last fiscal year's total revenue generated by TransDigm Group. The default revenue input number comes from 2016 income statement of TransDigm Group. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our TDG stock valuation model: a) initial revenue growth rate of 9.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 13.4%, whose default value for TDG is calculated based on our internal credit rating of TransDigm Group, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of TransDigm Group.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of TDG stock the variable cost ratio is equal to 58.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $53 million in the base year in the intrinsic value calculation for TDG stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.8% for TransDigm Group.

Corporate tax rate of 27% is the nominal tax rate for TransDigm Group. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the TDG stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for TDG are equal to 57%.

Life of production assets of 57.8 years is the average useful life of capital assets used in TransDigm Group operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for TDG is equal to 26.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $-651 million for TransDigm Group - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 53.022 million for TransDigm Group is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of TransDigm Group at the current share price and the inputted number of shares is $14.9 billion.

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COMPANY NEWS

▶ TransDigm beats Street 3Q forecasts   [Aug-08-17 05:32PM  Associated Press]
▶ 6 Aerospace and Defense Companies Gurus Are Buying   [Aug-07-17 03:27PM  GuruFocus.com]
▶ Stocks With Rising Relative Strength: Transdigm   [Jul-17-17 03:00AM  Investor's Business Daily]
▶ [$$] Hedge funds go to war over US defence contractor   [Jun-05-17 10:59AM  Financial Times]
▶ TransDigm Acquires Three Add-On Aerospace Product Lines   [Jun-01-17 02:41PM  PR Newswire]
▶ TransDigm: Sales Miss Sinks Stock   [09:44AM  Barrons.com]
▶ TransDigm tops 2Q profit forecasts   [07:42AM  Associated Press]
▶ Defense ETF outperforms S&P 500 this month   [Apr-28-17 01:26PM  CNBC Videos]
▶ [$$] Exploiting Our Good Name   [Apr-08-17 12:01AM  Barrons.com]
▶ [$$] Unfavorable Publicity   [Apr-03-17 06:59AM  The Wall Street Journal]
▶ TransDigm: The End is Nigh?   [Mar-27-17 12:43PM  Barrons.com]
▶ Why TransDigm is Tanking   [02:17PM  at Barrons.com]
Stock chart of TDG Financial statements of TDG
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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