Northrop Grumman Is Fully Valued: Why Patience Is Key Near $476
By stockpickr AI | March 5, 2026 | 10 min read
Investment Summary
Northrop Grumman is a high-quality defense leader in the Industrials sector that appears roughly fairly valued when discounting its long-term cash flow potential.
Investment Recommendation
Hold
Fair Value: $465.00
Current Price: $476.32
Upside/Downside: -2.4%
The intrinsic value aligns closely with the current market price, offering limited margin of safety at current multiples. While fundamentals are robust, the valuation reflects most of the near-term growth potential from existing contracts.
Key Metrics
- Market Cap: $71.8B
- P/E Ratio: 31.4x
- Forward P/E: 22.5x
- Revenue Growth (YoY): 5.5%
- Net Margin: 6.8%
- ROE: 14.2%
- Debt/Equity: 1.1
- Dividend Yield: 1.8%
Strengths
- Diverse defense portfolio with a backlog exceeding $80 billion.
- Strategic prime contractor status for the highly classified B-21 Raider and GBSD programs.
- Strong free cash flow conversion historically exceeding $2 billion annually.
- Consistent shareholder return policy through annual dividend increases and aggressive buyback programs.
Risk Factors
- Geopolitical reliance makes earnings vulnerable to shifts in U.S. foreign policy.
- Fixed-price contract accounting can lead to significant cost variances if inflation persists.
- Reliance on a single primary customer (the U.S. Government) for the majority of revenue.