Intrinsic value of Northrop Grumman - NOC

Previous Close

$293.86

  Intrinsic Value

$347.14

stock screener

  Rating & Target

hold

+18%

Previous close

$293.86

 
Intrinsic value

$347.14

 
Up/down potential

+18%

 
Rating

hold

We calculate the intrinsic value of NOC 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 2017), $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 51.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
Revenue, $m
  27,171
  28,602
  30,102
  31,673
  33,319
  35,044
  36,852
  38,748
  40,735
  42,819
  45,005
  47,297
  49,702
  52,225
  54,872
  57,650
  60,565
  63,623
  66,833
  70,202
  73,737
  77,448
  81,344
  85,432
  89,724
  94,230
  98,960
  103,925
  109,138
  114,610
Variable operating expenses, $m
  23,572
  24,749
  25,981
  27,272
  28,625
  30,042
  31,528
  33,086
  34,719
  36,431
  36,982
  38,866
  40,842
  42,915
  45,090
  47,373
  49,768
  52,281
  54,919
  57,687
  60,592
  63,642
  66,843
  70,202
  73,729
  77,432
  81,318
  85,398
  89,682
  94,178
Fixed operating expenses, $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
Total operating expenses, $m
  23,572
  24,749
  25,981
  27,272
  28,625
  30,042
  31,528
  33,086
  34,719
  36,431
  36,982
  38,866
  40,842
  42,915
  45,090
  47,373
  49,768
  52,281
  54,919
  57,687
  60,592
  63,642
  66,843
  70,202
  73,729
  77,432
  81,318
  85,398
  89,682
  94,178
Operating income, $m
  3,598
  3,853
  4,121
  4,401
  4,694
  5,002
  5,324
  5,662
  6,016
  6,388
  8,023
  8,432
  8,860
  9,310
  9,782
  10,277
  10,797
  11,342
  11,914
  12,515
  13,145
  13,807
  14,501
  15,230
  15,995
  16,798
  17,642
  18,527
  19,456
  20,431
EBITDA, $m
  6,566
  6,912
  7,275
  7,654
  8,052
  8,469
  8,906
  9,364
  9,844
  10,348
  10,876
  11,430
  12,012
  12,621
  13,261
  13,932
  14,637
  15,376
  16,151
  16,966
  17,820
  18,717
  19,658
  20,646
  21,684
  22,773
  23,916
  25,116
  26,375
  27,698
Interest expense (income), $m
  0
  778
  841
  924
  1,010
  1,101
  1,196
  1,295
  1,400
  1,509
  1,624
  1,744
  1,870
  2,003
  2,141
  2,287
  2,440
  2,600
  2,768
  2,945
  3,130
  3,325
  3,529
  3,743
  3,968
  4,204
  4,451
  4,712
  4,985
  5,271
  5,572
Earnings before tax, $m
  2,821
  3,013
  3,197
  3,391
  3,593
  3,806
  4,029
  4,262
  4,507
  4,764
  6,279
  6,561
  6,858
  7,169
  7,495
  7,837
  8,197
  8,574
  8,969
  9,385
  9,820
  10,278
  10,758
  11,262
  11,791
  12,347
  12,930
  13,542
  14,185
  14,859
Tax expense, $m
  762
  813
  863
  915
  970
  1,028
  1,088
  1,151
  1,217
  1,286
  1,695
  1,772
  1,852
  1,936
  2,024
  2,116
  2,213
  2,315
  2,422
  2,534
  2,652
  2,775
  2,905
  3,041
  3,184
  3,334
  3,491
  3,656
  3,830
  4,012
Net income, $m
  2,059
  2,199
  2,334
  2,475
  2,623
  2,778
  2,941
  3,111
  3,290
  3,478
  4,584
  4,790
  5,006
  5,233
  5,471
  5,721
  5,984
  6,259
  6,548
  6,851
  7,169
  7,503
  7,853
  8,221
  8,608
  9,013
  9,439
  9,886
  10,355
  10,847

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  32,269
  33,970
  35,751
  37,616
  39,571
  41,620
  43,767
  46,018
  48,379
  50,854
  53,450
  56,173
  59,029
  62,025
  65,169
  68,468
  71,929
  75,562
  79,374
  83,375
  87,574
  91,981
  96,608
  101,464
  106,561
  111,912
  117,529
  123,426
  129,617
  136,116
Adjusted assets (=assets-cash), $m
  32,269
  33,970
  35,751
  37,616
  39,571
  41,620
  43,767
  46,018
  48,379
  50,854
  53,450
  56,173
  59,029
  62,025
  65,169
  68,468
  71,929
  75,562
  79,374
  83,375
  87,574
  91,981
  96,608
  101,464
  106,561
  111,912
  117,529
  123,426
  129,617
  136,116
Revenue / Adjusted assets
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
Average production assets, $m
  17,226
  18,134
  19,085
  20,081
  21,124
  22,218
  23,364
  24,566
  25,826
  27,147
  28,533
  29,987
  31,511
  33,111
  34,789
  36,550
  38,398
  40,337
  42,372
  44,508
  46,749
  49,102
  51,572
  54,164
  56,885
  59,742
  62,741
  65,888
  69,193
  72,663
Working capital, $m
  -924
  -972
  -1,023
  -1,077
  -1,133
  -1,191
  -1,253
  -1,317
  -1,385
  -1,456
  -1,530
  -1,608
  -1,690
  -1,776
  -1,866
  -1,960
  -2,059
  -2,163
  -2,272
  -2,387
  -2,507
  -2,633
  -2,766
  -2,905
  -3,051
  -3,204
  -3,365
  -3,533
  -3,711
  -3,897
Total debt, $m
  15,572
  17,103
  18,706
  20,385
  22,144
  23,988
  25,921
  27,947
  30,071
  32,299
  34,635
  37,085
  39,656
  42,353
  45,182
  48,151
  51,266
  54,536
  57,967
  61,567
  65,347
  69,313
  73,477
  77,847
  82,435
  87,251
  92,307
  97,614
  103,185
  109,035
Total liabilities, $m
  29,042
  30,573
  32,176
  33,855
  35,614
  37,458
  39,391
  41,417
  43,541
  45,769
  48,105
  50,555
  53,126
  55,823
  58,652
  61,621
  64,736
  68,006
  71,437
  75,037
  78,817
  82,783
  86,947
  91,317
  95,905
  100,721
  105,777
  111,084
  116,655
  122,505
Total equity, $m
  3,227
  3,397
  3,575
  3,762
  3,957
  4,162
  4,377
  4,602
  4,838
  5,085
  5,345
  5,617
  5,903
  6,203
  6,517
  6,847
  7,193
  7,556
  7,937
  8,337
  8,757
  9,198
  9,661
  10,146
  10,656
  11,191
  11,753
  12,343
  12,962
  13,612
Total liabilities and equity, $m
  32,269
  33,970
  35,751
  37,617
  39,571
  41,620
  43,768
  46,019
  48,379
  50,854
  53,450
  56,172
  59,029
  62,026
  65,169
  68,468
  71,929
  75,562
  79,374
  83,374
  87,574
  91,981
  96,608
  101,463
  106,561
  111,912
  117,530
  123,427
  129,617
  136,117
Debt-to-equity ratio
  4.830
  5.030
  5.230
  5.420
  5.600
  5.760
  5.920
  6.070
  6.220
  6.350
  6.480
  6.600
  6.720
  6.830
  6.930
  7.030
  7.130
  7.220
  7.300
  7.380
  7.460
  7.540
  7.610
  7.670
  7.740
  7.800
  7.850
  7.910
  7.960
  8.010
Adjusted equity ratio
  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
  2,059
  2,199
  2,334
  2,475
  2,623
  2,778
  2,941
  3,111
  3,290
  3,478
  4,584
  4,790
  5,006
  5,233
  5,471
  5,721
  5,984
  6,259
  6,548
  6,851
  7,169
  7,503
  7,853
  8,221
  8,608
  9,013
  9,439
  9,886
  10,355
  10,847
Depreciation, amort., depletion, $m
  2,968
  3,059
  3,154
  3,254
  3,358
  3,467
  3,582
  3,702
  3,828
  3,960
  2,853
  2,999
  3,151
  3,311
  3,479
  3,655
  3,840
  4,034
  4,237
  4,451
  4,675
  4,910
  5,157
  5,416
  5,689
  5,974
  6,274
  6,589
  6,919
  7,266
Funds from operations, $m
  5,027
  5,258
  5,488
  5,729
  5,981
  6,246
  6,523
  6,814
  7,118
  7,438
  7,437
  7,788
  8,157
  8,544
  8,950
  9,376
  9,823
  10,292
  10,785
  11,302
  11,844
  12,413
  13,011
  13,638
  14,296
  14,987
  15,713
  16,475
  17,274
  18,114
Change in working capital, $m
  -46
  -49
  -51
  -53
  -56
  -59
  -61
  -64
  -68
  -71
  -74
  -78
  -82
  -86
  -90
  -94
  -99
  -104
  -109
  -115
  -120
  -126
  -132
  -139
  -146
  -153
  -161
  -169
  -177
  -186
Cash from operations, $m
  5,074
  5,307
  5,539
  5,782
  6,037
  6,304
  6,584
  6,878
  7,186
  7,509
  7,511
  7,866
  8,239
  8,630
  9,040
  9,471
  9,922
  10,396
  10,894
  11,416
  11,964
  12,539
  13,143
  13,777
  14,442
  15,141
  15,874
  16,643
  17,451
  18,300
Maintenance CAPEX, $m
  -1,636
  -1,723
  -1,813
  -1,908
  -2,008
  -2,112
  -2,222
  -2,336
  -2,457
  -2,583
  -2,715
  -2,853
  -2,999
  -3,151
  -3,311
  -3,479
  -3,655
  -3,840
  -4,034
  -4,237
  -4,451
  -4,675
  -4,910
  -5,157
  -5,416
  -5,689
  -5,974
  -6,274
  -6,589
  -6,919
New CAPEX, $m
  -867
  -908
  -951
  -996
  -1,044
  -1,094
  -1,146
  -1,202
  -1,260
  -1,321
  -1,386
  -1,454
  -1,525
  -1,600
  -1,678
  -1,761
  -1,848
  -1,939
  -2,035
  -2,136
  -2,242
  -2,353
  -2,470
  -2,592
  -2,721
  -2,857
  -2,999
  -3,148
  -3,305
  -3,469
Cash from investing activities, $m
  -2,503
  -2,631
  -2,764
  -2,904
  -3,052
  -3,206
  -3,368
  -3,538
  -3,717
  -3,904
  -4,101
  -4,307
  -4,524
  -4,751
  -4,989
  -5,240
  -5,503
  -5,779
  -6,069
  -6,373
  -6,693
  -7,028
  -7,380
  -7,749
  -8,137
  -8,546
  -8,973
  -9,422
  -9,894
  -10,388
Free cash flow, $m
  2,571
  2,676
  2,775
  2,878
  2,986
  3,098
  3,216
  3,340
  3,469
  3,605
  3,411
  3,560
  3,716
  3,879
  4,051
  4,231
  4,420
  4,618
  4,825
  5,043
  5,272
  5,512
  5,763
  6,027
  6,305
  6,596
  6,901
  7,221
  7,558
  7,911
Issuance/(repayment) of debt, $m
  1,173
  1,531
  1,603
  1,679
  1,759
  1,844
  1,933
  2,026
  2,124
  2,228
  2,336
  2,451
  2,571
  2,697
  2,829
  2,969
  3,115
  3,269
  3,431
  3,601
  3,779
  3,967
  4,164
  4,370
  4,588
  4,816
  5,056
  5,307
  5,572
  5,849
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  1,173
  1,531
  1,603
  1,679
  1,759
  1,844
  1,933
  2,026
  2,124
  2,228
  2,336
  2,451
  2,571
  2,697
  2,829
  2,969
  3,115
  3,269
  3,431
  3,601
  3,779
  3,967
  4,164
  4,370
  4,588
  4,816
  5,056
  5,307
  5,572
  5,849
Total cash flow (excl. dividends), $m
  3,744
  4,207
  4,378
  4,557
  4,745
  4,942
  5,149
  5,366
  5,594
  5,833
  5,747
  6,010
  6,286
  6,576
  6,880
  7,200
  7,535
  7,887
  8,256
  8,644
  9,051
  9,478
  9,927
  10,398
  10,892
  11,411
  11,956
  12,529
  13,129
  13,760
Retained Cash Flow (-), $m
  -439
  -170
  -178
  -187
  -195
  -205
  -215
  -225
  -236
  -248
  -260
  -272
  -286
  -300
  -314
  -330
  -346
  -363
  -381
  -400
  -420
  -441
  -463
  -486
  -510
  -535
  -562
  -590
  -619
  -650
Prev. year cash balance distribution, $m
  4,260
  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
  103
  109
  114
  120
  127
  133
  140
  147
  155
  163
  171
  180
  189
  199
  209
  219
  231
  242
  254
  267
  281
  295
  310
  325
  342
  359
  377
  396
  416
  437
Cash available for distribution, $m
  7,565
  4,037
  4,200
  4,370
  4,549
  4,737
  4,934
  5,141
  5,358
  5,585
  5,487
  5,738
  6,001
  6,277
  6,566
  6,870
  7,189
  7,524
  7,875
  8,244
  8,631
  9,038
  9,464
  9,912
  10,383
  10,876
  11,395
  11,939
  12,510
  13,110
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  7,253
  3,696
  3,655
  3,599
  3,526
  3,438
  3,333
  3,213
  3,078
  2,928
  2,606
  2,449
  2,282
  2,107
  1,928
  1,746
  1,564
  1,386
  1,213
  1,048
  893
  750
  620
  505
  404
  317
  245
  185
  137
  99
Current shareholders' claim on cash, %
  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
  100.0

Northrop Grumman Corporation is a global security company. The Company provides products, systems and solutions in autonomous systems; cyber; command, control, communications and computers, intelligence, surveillance and reconnaissance (C4ISR); strike, and logistics and modernization. The Company's segments include Aerospace Systems, Mission Systems and Technology Services. The Company's Aerospace Systems segment is engaged in the design, development, integration and production of manned aircraft, autonomous systems, spacecraft, high-energy laser systems, microelectronics and other systems/subsystems. The Mission Systems segment offers mission solutions and multifunction systems for Department of Defense (DoD), intelligence community, international, federal civil and commercial customers. The Technology Services segment provides logistics solutions supporting the full life cycle of platforms and systems for global defense and federal-civil customers.

FINANCIAL RATIOS  of  Northrop Grumman (NOC)

Valuation Ratios
P/E Ratio 23.4
Price to Sales 2.1
Price to Book 9.8
Price to Tangible Book
Price to Cash Flow 18.3
Price to Free Cash Flow 27.2
Growth Rates
Sales Growth Rate 4.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 95.3%
Cap. Spend. - 3 Yr. Gr. Rate 20.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 134.2%
Total Debt to Equity 134.2%
Interest Coverage 0
Management Effectiveness
Return On Assets 8.8%
Ret/ On Assets - 3 Yr. Avg. 8.1%
Return On Total Capital 18.2%
Ret/ On T. Cap. - 3 Yr. Avg. 16%
Return On Equity 40.8%
Return On Equity - 3 Yr. Avg. 31.7%
Asset Turnover 1
Profitability Ratios
Gross Margin 23.6%
Gross Margin - 3 Yr. Avg. 23.6%
EBITDA Margin 13.8%
EBITDA Margin - 3 Yr. Avg. 13.9%
Operating Margin 13%
Oper. Margin - 3 Yr. Avg. 13.1%
Pre-Tax Margin 11.9%
Pre-Tax Margin - 3 Yr. Avg. 12%
Net Profit Margin 9%
Net Profit Margin - 3 Yr. Avg. 8.7%
Effective Tax Rate 24.7%
Eff/ Tax Rate - 3 Yr. Avg. 27.7%
Payout Ratio 29.1%

NOC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NOC stock intrinsic value calculation we used $25803 million for the last fiscal year's total revenue generated by Northrop Grumman. The default revenue input number comes from 2017 income statement of Northrop Grumman. 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 NOC stock valuation model: a) initial revenue growth rate of 5.3% 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 4.3%, whose default value for NOC is calculated based on our internal credit rating of Northrop Grumman, 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 Northrop Grumman.
    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 NOC stock the variable cost ratio is equal to 87%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for NOC 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 5.4% for Northrop Grumman.

Corporate tax rate of 27% is the nominal tax rate for Northrop Grumman. 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 NOC stock is equal to 0.4%.

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 NOC are equal to 63.4%.

Life of production assets of 10 years is the average useful life of capital assets used in Northrop Grumman 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 NOC is equal to -3.4%. 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 - $7048 million for Northrop Grumman - 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 174 million for Northrop Grumman 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 Northrop Grumman at the current share price and the inputted number of shares is $51.1 billion.

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