Now is not the time to buy Northrop Grumman stock

We believe there are several things to fear in NOC stock given its overall Weak operating performance and financial condition. In addition, keeping in mind its High valuation, we think that the stock is Unattractive. Here is our multi-factor assessment.

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Let’s get into details of each of the assessed factors but before that, for quick background: With $84 Bil in market cap, Northrop Grumman provides aerospace and defense solutions, including aircraft systems, satellites, ground systems, missile defense, interceptors, launch vehicles, and propulsion systems worldwide.

[1] Valuation Looks High

This table highlights how NOC is valued vs broader market. For more details see: NOC Valuation Ratios

[2] Growth Is Inconsistent

• Northrop Grumman has seen its top line grow at an average rate of 4.6% over the last 3 years
• Its revenues have grown 0.6% from $40 Bil to $40 Bil in the last 12 months
• Also, its quarterly revenues declined -6.6% to $9.5 Bil in the most recent quarter from $10 Bil a year ago.

This table highlights how NOC is growing vs broader market. For more details see: NOC Revenue Comparison

[3] Profitability Appears Weak

• NOC last 12 month operating income was $3.9 Bil representing operating margin of 9.6%
• With cash flow margin of 8.7%, it generated nearly $3.5 Bil in operating cash flow over this period
• For the same period, NOC generated nearly $3.7 Bil in net income, suggesting net margin of about 9.2%

This table highlights how NOC profitability vs broader market. For more details see: NOC Operating Income Comparison

[4] Financial Stability Looks Strong

• NOC Debt was $16 Bil at the end of the most recent quarter, while its current Market Cap is $84 Bil. This implies Debt-to-Equity Ratio of 18.9%
• NOC Cash (including cash equivalents) makes up $1.7 Bil of $48 Bil in total Assets. This yields a Cash-to-Assets Ratio of 3.5%

[4] Downturn Resilience Is Weak

NOC has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• NOC stock fell 23.5% from a high of $549.01 on 31 October 2022 to $420.07 on 5 October 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 22 July 2025
• Since then, the stock increased to a high of $589.95 on 5 August 2025 , and currently trades at $583.96

 
2020 Covid Pandemic

• NOC stock fell 29.9% from a high of $384.87 on 30 January 2020 to $269.86 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 8 October 2021

 
2008 Global Financial Crisis

• NOC stock fell 59.5% from a high of $84.48 on 6 November 2007 to $34.20 on 20 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 8 July 2013

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