TDG At Support Zone: Bargain or Bear Trap?
TransDigm (TDG) should be on your watchlist. Here is why – it is currently trading in the support zone ($1,217.72 – $1,345.90), levels from which it has bounced meaningfully before. In the last 10 years, the stock received buying interest at this level 3 times and subsequently went on to generate 13.5% in average peak returns.
| Peak Return | Days to Peak Return | |
|---|---|---|
| 9/16/2024 | 8.6% | 28 |
| 12/4/2024 | 7.0% | 119 |
| 4/10/2025 | 24.9% | 111 |
But is the price action enough alone? It certainly helps if the fundamentals check out. For TDG Read Buy or Sell TDG Stock to see how convincing this buy opportunity might be.
Here are some quick data points:
- Revenue Growth: 12.8% LTM and 18.2% last 3 year average.
- Cash Generation: Nearly 22.2% free cash flow margin and 46.4% operating margin LTM.
- Recent Revenue Shocks: The minimum annual revenue growth in last 3 years for TDG was 12.8%.
- Valuation: TDG trades at a PE multiple of 38.4
- Opportunity vs S&P: Compared to S&P, you get higher valuation, higher revenue growth, and better margins
TransDigm provides aircraft components including mechanical actuators, ignition systems, engineered latches, connectors, sealing solutions, and safety restraints for ground transportation applications.
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| TDG | S&P Median | |
|---|---|---|
| Sector | Industrials | – |
| Industry | Aerospace & Defense | – |
| PE Ratio | 38.4 | 24.1 |
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| LTM* Revenue Growth | 12.8% | 5.1% |
| 3Y Average Annual Revenue Growth | 18.2% | 5.3% |
| Min Annual Revenue Growth Last 3Y | 12.8% | -0.1% |
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| LTM* Operating Margin | 46.4% | 18.7% |
| 3Y Average Operating Margin | 45.1% | 17.9% |
| LTM* Free Cash Flow Margin | 22.2% | 13.4% |
*LTM: Last Twelve Months
That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure
What Is Stock-Specific Risk If The Market Crashes?
That said, TDG isn’t immune to big drops. It fell 52% during the Global Financial Crisis and took a 63% hit in the Covid pandemic crash. The 2018 correction sliced about 18%, while the inflation shock dragged it down 25%. Even solid companies like this can see sharp declines when the market turns. Risk is always there, no matter the positives.
But the risk is not limited to major market crashes. Stocks fall even when markets are in good shape – think events like earnings, business updates, outlook changes. Read TDG Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.