Northrop Grumman Corporation

(New York Stock Exchange)
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Slightly Bullish +25

Is Northrop Grumman (NOC) Still Attractive After Recent Share Price Pullback?

AI-generated analysis

πŸ“‰ Northrop Grumman (NOC) shares have recently fallen 15.1% in the past month and 1.4% in the last week, leaving the stock down 1.1% year-to-date despite a 21.0% gain over the last twelve months.

πŸ” Analysts from Simply Wall St are questioning whether the current share price of approximately $579.48 reflects real value or an inflated valuation given the recent pullback.

πŸ’° A Discounted Cash Flow (DCF) model projects future free cash flows totaling $3.31 billion in 2026, growing to $3.90 billion by 2030 based on a two-stage free cash flow to equity approach.

πŸ“Š The DCF analysis calculates an estimated intrinsic value of $496.73 per share, suggesting the stock is currently trading at a 16.7% premium and may be overvalued on this metric.

βš–οΈ Conversely, the Price-to-Earnings (P/E) ratio method shows Northrop Grumman trading at 18.0x earnings compared to a calculated fair ratio of 25.47x, implying the stock is undervalued relative to its fundamentals.

πŸ›‘οΈ Industry comparisons show Northrop Grumman's P/E is significantly lower than the Aerospace & Defense industry average of roughly 37.0x and a peer average of about 37.2x.

πŸ“ˆ The article highlights that Northrop Grumman's recent 21.0% return over the past year lags behind its peers, with only 3-year and 5-year returns of 37.7% and 69.8% respectively.

πŸ›οΈ Recent market movements are attributed to headlines surrounding the company's role as a major US defense contractor and its alignment with long-term government spending priorities.

πŸ“‰ Simply Wall St's proprietary valuation checks currently rate Northrop Grumman at 4 out of 6 for overall attractiveness based on their methodology.

🎯 The article suggests that valuing the stock requires considering multiple narratives, ranging from high fair value estimates near $815 driven by demand for programs like B-21 to cautious views around $587.22.

🧠 Investors are encouraged to assess specific risk factors such as contract concentration and execution challenges which could impact the actual fair value of the stock.

πŸ’‘ The analysis concludes that while different valuation models yield conflicting signals regarding overvaluation or undervaluation, a narrative-driven approach may provide a more complete picture of future value.

Bullish Signals
  • Northrop Grumman has delivered a strong 21.0% return over the past year, alongside impressive 3-year and 5-year returns of 37.7% and 69.8% respectively.
  • The company is well-positioned within the US defense sector, benefiting from long-term government spending priorities and national security focus.
  • According to Simply Wall St's proprietary 'Fair Ratio' analysis, Northrop Grumman trades at a P/E of 18.0x, which is below its estimated fair value of 25.47x, suggesting the shares could be undervalued on this measure.
  • Analyst consensus fair value estimates place the stock at approximately US$721.78, indicating significant upside potential compared to the current price of US$579.48.
  • Strong demand for key programs like the B-21 bomber and advanced space systems provides a robust narrative that could support higher future fair values.
Risk Factors
  • The stock has experienced a 15.1% decline in the past month and a 1.4% fall over the last week, leaving the year-to-date return at a 1.1% decline.
  • Simply Wall St's Discounted Cash Flow model estimates an intrinsic value of $496.73 per share, indicating the current price of around $579.48 trades at a 16.7% premium to this estimate.
  • The current P/E ratio of about 18.0x is significantly below Simply Wall St's Fair Ratio of 25.47x, suggesting the stock may be undervalued based on growth projections but overvalued based on DCF models.
  • Investor narratives highlight risks such as contract concentration, budget risk, and execution challenges which could align fair value estimates with a lower range near $587.22 rather than higher consensus targets.
  • The DCF analysis projects Free Cash Flow of $3.90b by 2030, but the current price already reflects a significant premium over these discounted future cash flow projections.
Full Analysis
Northrop Grumman (NOC) shares have experienced a notable price decline recently, with a 15.1% drop in the past month and a 1.4% fall last week, resulting in a year-to-date return of 1.1% despite a 21.0% gain over the past 12 months as of May 2026. The stock currently trades around US$579.48. While recent headlines focus on the company's position as a major U.S. defense contractor and its alignment with long-term government spending, this article analyzes whether these short-term pullbacks present a value opportunity or if the high price tag is unjustified given broader market movements. Simply Wall St provides a 4 out of 6 valuation score for Northrop Grumman at the time of publication, which leads into two distinct analysis methods. First, a Discounted Cash Flow (DCF) model using a 2 Stage Free Cash Flow to Equity approach projects future cash flows starting from a latest twelve-month figure of about $2.99 billion, with estimates rising to $3.31 billion in 2026 and $3.90 billion by 2030. Discounting these projections back to the present yields an estimated intrinsic value of approximately US$496.73 per share. This metric suggests the stock is trading at a 16.7% premium to its calculated fair value, indicating it may be overvalued based on this specific model. In contrast, a Price-to-Earnings (P/E) analysis presents a different perspective. Northrop Grumman trades at a P/E ratio of roughly 18.0x, which is significantly lower than the Aerospace & Defense industry average of 37.0x and its peer group average of 37.2x. Simply Wall St's proprietary "Fair Ratio," which accounts for factors like earnings growth and company-specific risks such as profit margins, is set at 25.47x. Since the current P/E of 18.0x falls well below this fair ratio, the valuation appears undervalued on this metric. The article concludes by introducing a third perspective using "Narratives" to contextualize these financial numbers. This approach encourages investors to form specific stories about Northrop Grumman's future based on different assumptions regarding revenue, earnings, and margins linked to programs like the B-21 bomber, space systems, or AI tools. Depending on whether an investor leans toward a bullish view of strong program demand or a cautious view involving budget risks, their estimated fair value could range from around US$587.22 to US$815, offering different conclusions about the attractiveness of the current share price of approximately US$579.48.