Value
6.4/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 7.6 |
| P/S | 9.1 |
| EV/EBITDA | 4.6 |
| Fwd P/E | 7.2 |
| PEG | 3.2 |
| Analyst target | 7.5 |
- ▸Forward P/E: 17.3x
- ▸PEG: 3.88
NOC · Why this verdict
Why Northrop Grumman (NOC) is rated BUY WAIT
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictBUY WAIT
Overall score6.1/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
Northrop Grumman has delivered four consecutive earnings beats and a 29% return on equity with strong peer-relative valuation, but a confirmed death-cross technical pattern, high US government customer concentration of 84%, and below-average free cash flow quality present meaningful risks for new buyers.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Northrop has beaten earnings estimates in all 4 of the last 4 quarters, with the most recent two beats exceeding 18%, indicating the company is consistently delivering above analyst expectations on program execution and cost management. Earnings | Earnings beats continue in at least 3 of the next 4 quarters with positive surprises above 5%. | →Stable |
| CounterDefense contractor earnings beats often reflect program timing and milestone billing rather than true operational acceleration, and the high PEG of 4.06 suggests limited growth to justify the beat pattern. | ||
Approximately 84% of Northrop Grumman's revenue comes from the US government, making the company's financial performance highly dependent on federal defense budget decisions, continuing resolutions, and potential sequestration events. Bear case | Non-US-government revenue grows to represent at least 20% of total revenue within 24 months through international defense contract wins. | →Stable |
| CounterUS government concentration provides extraordinary revenue visibility and stability since defense contracts are multi-year, and the current geopolitical environment supports sustained or growing defense spending. | ||
A confirmed death-cross is blocking a buy signal with a hard gate failure, and the stock's momentum score of 4.1 is below the minimum threshold of 4.5, with on-balance volume declining, indicating institutional distribution rather than accumulation. Engine gate (failed) | The death cross resolves into a golden cross within 5 months as the price recovers above the 200-day moving average. | →Stable |
| CounterMACD is improving and RSI at 46 is not yet oversold, suggesting the death cross may be in the early stages of resolution, particularly if defense spending news acts as a catalyst. | ||
Northrop Grumman's return on equity of 29% is rated as excellent and places it among the top-performing peers in the aerospace and defense sector, reflecting efficient capital deployment on its defense programs. Quality breakdown | Return on equity remains above 25% over the next 12 months as program profitability sustains current capital efficiency. | →Stable |
| CounterHigh ROE in defense contractors is often supported by negative tangible book equity from pension obligations and buybacks rather than genuine business quality improvement. | ||
Northrop has beaten earnings estimates in all 4 of the last 4 quarters, with the most recent two beats exceeding 18%, indicating the company is consistently delivering above analyst expectations on program execution and cost management.
→StableEarnings
- Expectation
- Earnings beats continue in at least 3 of the next 4 quarters with positive surprises above 5%.
CounterDefense contractor earnings beats often reflect program timing and milestone billing rather than true operational acceleration, and the high PEG of 4.06 suggests limited growth to justify the beat pattern.
Approximately 84% of Northrop Grumman's revenue comes from the US government, making the company's financial performance highly dependent on federal defense budget decisions, continuing resolutions, and potential sequestration events.
→StableBear case
- Expectation
- Non-US-government revenue grows to represent at least 20% of total revenue within 24 months through international defense contract wins.
CounterUS government concentration provides extraordinary revenue visibility and stability since defense contracts are multi-year, and the current geopolitical environment supports sustained or growing defense spending.
A confirmed death-cross is blocking a buy signal with a hard gate failure, and the stock's momentum score of 4.1 is below the minimum threshold of 4.5, with on-balance volume declining, indicating institutional distribution rather than accumulation.
→StableEngine gate (failed)
- Expectation
- The death cross resolves into a golden cross within 5 months as the price recovers above the 200-day moving average.
CounterMACD is improving and RSI at 46 is not yet oversold, suggesting the death cross may be in the early stages of resolution, particularly if defense spending news acts as a catalyst.
Northrop Grumman's return on equity of 29% is rated as excellent and places it among the top-performing peers in the aerospace and defense sector, reflecting efficient capital deployment on its defense programs.
→StableQuality breakdown
- Expectation
- Return on equity remains above 25% over the next 12 months as program profitability sustains current capital efficiency.
CounterHigh ROE in defense contractors is often supported by negative tangible book equity from pension obligations and buybacks rather than genuine business quality improvement.
Per-dimension breakdown
Quality
4.9/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 9.5 |
| ROA | 4.9 |
| Gross margin | 0.1 |
| Op margin | 4.7 |
| Net margin | 5.4 |
| Current ratio | 4.5 |
| FCF quality | 3.6 |
| Moat | 4.9 |
| Piotroski F | 6.7 |
- ▸Excellent ROE: 29%
- ▸Earnings quality RED FLAG: 45% FCF/NI
- ▸No competitive moat
Growth
6.8/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 3.6 |
| EPS growth | 10.0 |
Momentum
5.3/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.7 |
| MACD | 10.0 |
| OBV | 5.3 |
| MA position | 4.0 |
| Volume | 3.5 |
- ▸Below 200-MA, MA slope -1.1%/30d — confirmed downtrend
Sentiment
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 4.6 |
| Analyst rating | 7.5 |
| Price target | 8.4 |
- ▸Analyst upside: 28%
Insider
7.3/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 10.0 |
| notable moves | 7.0 |
- ▸Negligible insider selling — $54,310 (0.000% of mkt cap)
- ▸Institutions accumulating
Peer rank
5.0/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 8.7 |
| quality rank | 8.3 |
| growth rank | 1.1 |
- ▸Attractive P/E vs peers
- ▸Superior ROE vs peers
Technical
4.5/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 4.9 |
| support resistance | 4.9 |
| 52w position | 3.6 |
Risk (lower is worse)
7.1/10data confidence 80%| Component | Sub-score |
|---|---|
| short interest | 9.2 |
| days to cover | 8.7 |
| volatility | 5.8 |
| debt equity | 4.9 |
- ▸Concentration risks: 1 HIGH (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
7.3/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 8.0 |
| dividend safety | 8.0 |
| news activity | 8.0 |
- ▸Perfect beat streak: 4Q
- ▸Earnings in 1 days
- ▸Dividend aristocrat: 1.8% yield
How the verdict was assembled
Engine trigger
Earnings in 1 day. Wait until post-earnings.
Engine technical detail
verdict_path:
L3:NEWS_BLOCK|ENTRY_STICKY:WITHIN_BANDPassed (7)
- MOMENTUM:5.3>=4.5
- ASYMMETRY:2.6>=1.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- EARNINGS_PROXIMITY:1d<=7d
Warning (2)
- MOMENTUM:5.3<5.5 (soft — BUY_NOW allowed but watch)
- DEATH_CROSS:momentum=5.3>=5.0 recovering
Reward-to-Risk
2.64
Upside
+15.2%
Downside
5.7%
Sizing output
STARTER
SetupRecovery — Death cross but MACD improving, RSI 63
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
A recent news event triggered an L3 news-block on the verdict path. Trigger: Earnings in 1 day. Wait until post-earnings. The 10-dimension scores remain Insider at 7.3 (strongest), but EARNINGS_PROXIMITY:1d<=7d also fails — the news block is the proximate trigger, not the sole driver.
The strongest dimensions are Insider at 7.3, Catalyst at 7.3, and Risk (lower is worse) at 7.1; the weakest are Technical at 4.5, Quality at 4.9, and Peer rank at 5.0. The V9 engine flagged 1 failed gate with 2 warnings, producing an asymmetric reward-to-risk of 2.64 and an engine sizing output of STARTER.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Government Customer Concentration
Trip ifDefense budget appropriations fall below prior-year levels, causing management to lower full-year revenue guidance by more than 5%.
- P2Consecutive Earnings Beat Streak
Trip ifEarnings surprise falls below 0% in at least 2 of the next 4 quarters.
- P3Death Cross Momentum Blockage
Trip ifPrice drops below $500 while still in a confirmed death-cross pattern.
- P4Excellent Roe Peer Ranking
Trip ifReturn on equity falls below 20% for 2 consecutive quarters.