General Dynamics Corp (NYSE: GD)

Sector: Industrials Industry: Aerospace & Defense CIK: 0000040533
Market Cap 95.62 Bn
P/B 3.91
P/E 22.69
P/S 1.86
ROIC (Qtr) 13.70
Div Yield % 2.10
Rev 1y % (Qtr) 10.59
Total Debt (Qtr) 8.01 Bn
Debt/Equity (Qtr) 0.33

About

General Dynamics Corporation (GD), a prominent player in the aerospace and defense industry, has carved out a significant niche for itself through its high-end design, engineering, and manufacturing capabilities. The company's operations are divided into four primary segments: Aerospace, Marine Systems, Combat Systems, and Technologies. With a history that spans over a century, General Dynamics has solidified its position as a trusted provider of state-of-the-art solutions in the defense sector. The Aerospace segment of General Dynamics is renowned...

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Price action

Investment thesis

Bull case

  • Strong operating cash flow of 5.72B provides robust 0.71x coverage of total debt 8.01B, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 2.52B provide 2.50x coverage of short-term debt 1.01B, demonstrating strong liquidity position and minimal refinancing risk.
  • Strong tangible asset base of 35.33B provides 4.41x coverage of total debt 8.01B, indicating robust asset backing and low credit risk.
  • Operating cash flow of 5.72B provides strong 29.79x coverage of stock compensation 192M, indicating sustainable incentive practices.
  • Operating cash flow of 5.72B provides exceptional 17.49x coverage of interest expenses 327M, showing strong debt service capability.

Bear case

  • Operating cash flow of 5.72B barely covers its investment activities of (787M), with a coverage ratio of -7.27, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • With cash reserves of 2.52B against inventory of 9.81B, the 0.26 cash-to-inventory ratio suggests potential liquidity risks if inventory turnover slows, particularly concerning given current supply chain volatilities.
  • Operating cash flow of 5.72B provides thin coverage of dividend payments of (1.58B) with a -3.63 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Free cash flow of 4.81B represents just -3.84x of debt issuance (1.25B), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Retained earnings of 43.34B provide limited buffer against comprehensive income items of (860M), which is -50.40x, indicating elevated exposure to market risks.

Segments Breakdown of Revenue (2024)

Geographical Breakdown of Revenue (2024)

Peer comparison

Companies in the Aerospace & Defense
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 GE General Electric Co 342.94 Bn 42.54 7.80 20.84 Bn
2 RTX RTX Corp 252.05 Bn 38.24 2.93 40.71 Bn
3 BA Boeing Co 174.43 Bn -17.16 2.16 53.35 Bn
4 LMT Lockheed Martin Corp 126.61 Bn 30.15 1.73 22.19 Bn
5 GD General Dynamics Corp 95.62 Bn 22.69 1.86 8.01 Bn
6 NOC Northrop Grumman Corp /De/ 89.30 Bn 22.22 2.18 16.96 Bn
7 HWM Howmet Aerospace Inc. 88.16 Bn 60.80 11.05 3.19 Bn
8 TDG TransDigm Group INC 80.97 Bn 43.39 9.17 30.02 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.78 3.58
EV to Cash from Ops. EV/CFO 17.98 58.38
EV to Debt EV to Debt 12.83 98.04
EV to EBIT EV/EBIT 19.04 19.42
EV to EBITDA EV/EBITDA 17.16 33.60
EV to Free Cash Flow [EV/FCF] EV/FCF 21.36 91.66
EV to Market Cap EV to Market Cap 1.08 1.13
EV to Revenue EV/Rev 2.00 11.27
Price to Book Value [P/B] P/B 3.91 4.81
Price to Earnings [P/E] P/E 22.69 31.79
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 2.67 -3.75
Dividend Payout Ratio % Div Payout % (Qtr) 37.40 22.95
Dividend per Basic Share Div per Share (Qtr) 5.92 0.70
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 33.09 14.15
Interest Coverage Int. cover (Qtr) 16.51 -18.00
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -4.86 -50.32
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 19.94 1,609.43
Dividend Growth (1y) % Div 1y % (Qtr) 6.09 0.75
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 14.79 -30.98
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 13.23 10.65
EBIT Growth (1y) % EBIT 1y % (Qtr) 14.26 -26.90
EBT Growth (1y) % EBT 1y % (Qtr) 15.30 -27.25
EPS Growth (1y) % EPS 1y % (Qtr) 17.29 -99.21
FCF Growth (1y) % FCF 1y % (Qtr) 110.78 6.61
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 9.62 -5.55
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.89 0.51
Cash Payout Ratio Cash Payout (Qtr) 0.24 0.07
Cash Ratio Cash Ratio (Qtr) 0.14 1.76
Current Ratio Curr Ratio (Qtr) 1.40 3.72
Debt to Equity Ratio Debt/Equity (Qtr) 0.33 0.07
Interest Cover Ratio Int Coverage (Qtr) 16.51 -18.00
Times Interest Earned Times Interest Earned (Qtr) 16.51 -18.00
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 11.80 -345.84
EBIT Margin % EBIT Margin % (Qtr) 10.48 -382.63
EBT Margin % EBT Margin % (Qtr) 9.85 -387.93
Gross Margin % Gross Margin % (Qtr) 15.30 -33.31
Net Profit Margin % Net Margin % (Qtr) 8.20 -389.13