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Should You Buy TransDigm Group Incorporated (TDG) Stock Tuesday?

Tuesday, November 24, 2020 10:04 AM | InvestorsObserver Analysts

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Should You Buy TransDigm Group Incorporated (TDG) Stock Tuesday?

TransDigm Group Incorporated (TDG) receives a weak valuation score of 4 from InvestorsObserver's analysis. Our proprietary scoring system considers the overall health of the company by looking at the stock's price, earnings, and growth rate to determine if it represents a good value. TDG holds a better value than 4% of stocks at its current price. Investors who are focused on long-term growth through buy-and-hold investing will find the Valuation Rank especially relevant when allocating their assets.

Valuation Rank - 4
TDG gets a 4 Valuation Rank today. Find out what this means to you and get the rest of the rankings on TDG!

Metrics Analysis

TDG has a trailing twelve month Price to Earnings (PE) ratio of 64.1. The historical average of roughly 15 shows a poor value for TDG stock as investors are paying higher share prices relative to the company's earnings. TDG's high trailing PE ratio shows that the firm has been trading above its fair market value recently. Its trailing 12-month earnings per share (EPS) of 8.96 does not justify the stock's current price. However, trailing PE ratios do not factor in the company's projected growth rate, resulting in many newer firms having high PE ratios due to high growth potential enticing investors despite inadequate earnings.

TDG's 12-month-forward PE to Growth (PEG) ratio of 15.28 is considered a poor value as the market is overvaluing TDG in relation to the company's projected earnings growth due. TDG's PEG comes from its forward price to earnings ratio being divided by its growth rate. A PEG ratio of 1 represents a perfect correlation between earnings growth and share price. Due to their incorporation of more fundamentals of a company's overall health and focusing on the future rather than the past, PEG ratios are one of the most used valuation metrics by analysts today.

Summary

TDG' has a weak valuation at its current share price on account of a overvalued PEG ratio due to strong growth. TDG's PE and PEG are worse than the market average leading to a below average valuation score.

Click Here to get the full Stock Score Report on TransDigm Group Incorporated (TDG) Stock.

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