GENERAL DYNAMICS CORPORATION (GD): what the price requires

At today's price, GENERAL DYNAMICS CORPORATION (GD) is priced for +9.2% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/GD

Headline

FieldValue
TickerGD
CompanyGENERAL DYNAMICS CORPORATION
Current price$373.13/sh
CompositionAircraft manufacturing 18% / Aircraft services 7% / Nuclear-powered submarines 24% / Surface ships 6% / Repair and other services 2% / Military vehicles 9% / Weapon systems and munitions 6% / Engineering and other services 2% / Information technology (IT) services 17% / C5ISR solutions 8%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed3.5%
Operating margin today10.3%
Margin compression implied-6.8pp
Implied growth9.2%
Multiple paid21x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 8.1% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.3pp.

Reconcile: at the x-ray's 9.3% required return this reads ~17.3%/yr; the models below use their own rates.

How unusual the bet is: within-range

ReferenceValue
vs own history+0.68σ
cohort percentile (of 225 peers)45
implied end-window share0%

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.91x4expensive
Earnings1.74x3expensive
Relative0.95x3justifies
Growth0.71x3justifies

Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.8%); the inversion above states its own rate.

Per-Model Detail (n=13)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$651.440.57xyesFCF base $6.7B, growth 9% (input: historical growth), terminal g 4.0%, WACC 8.8%, 6yr projection
DCF Exit MultipleGrowth$522.450.71xyesExit EV/EBITDA: 14.8x / 16.8x / 18.8x (bear / base = today's held flat / bull), 6yr
Relative ValuationRelative$392.570.95xyesP/S fallback (negative EPS): Sector P/S 2.0x × TTM revenue — excluded from consensus
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$171.202.18xyesBV/sh $95.13, ROE (TTM) 16.6%, ke 9.3%
Two-Stage Excess ReturnAsset$226.681.65xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$368.951.01xyesRev $53.8B, growth 9% (input: historical growth; tapered), Terminal P/S: 1.6x / 1.9x / 2.2x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$0.00—noNegative/zero EPS — earnings-based value floored at $0
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$155.262.40xyesNormalized EBIT (5y avg op income, one-time charges added back) $4.65B × (1−18%) / WACC 8.8% → EPV (no growth)
Residual IncomeAsset$228.911.63xyesBV $95.13 + 5yr PV of (ROE (TTM) 16.6% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset——no—
EV/EBITDA RelativeRelative$306.411.22xyesEBITDA $6.44B × sector EV/EBITDA 14.0x
FCF YieldEarnings$222.011.68xyesFCF $6201.0M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$214.051.74xyesSBC-adj FCF $6.00B (FCF $6.20B − SBC $0.20B) capitalized at Kₑ
Ben Graham FormulaEarnings——no—
ROIC-Justified P/BAsset$39.119.54xyesBV $95.13 × (ROIC 3.6% / WACC 8.8%)
P/Sales SectorRelative$392.570.95xyesRevenue $53.81B × sector P/S 2.0x
PEG Fair ValueRelative——no—
Earnings YieldEarnings——no—
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$6.6b
Net debt / NOPAT (after-tax)1.50x
Net debt / operating income (pre-tax)1.23x
Share count CAGR (buyback)-0.5%
Burning cashno

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

Bull Case

Start with the balance sheet, because it tells you how much confidence the business can afford. General Dynamics carries gross debt near $10.2 billion against trailing operating income of about $5.5 billion, a net-debt-to-operating-income ratio near 1.2x, a conservative load for a company with multi-decade defense contracts and a roughly $95 book value per share. Management runs the business as a steady cash machine: it pays a growing dividend, buys back stock, and keeps leverage low, the posture of a team that trusts its own visibility. The share count has edged down, and the modest dividend leaves ample free cash flow, over $6 billion on a trailing basis, for reinvestment and returns.

The confidence is justified by the most important number in defense, the backlog. General Dynamics ended Q1 2026 with a $131 billion backlog, up 48% year over year and 11% sequentially on a 2:1 book-to-bill ratio, with total estimated contract value at a record $188 billion. The FY2025 10-K notes potential contract value in the defense segments of $59.8 billion at year end (FY2025 10-K, accession 0000040533-26-000006), and the order book has grown sharply since. That backlog converts to revenue over years, which is why the Marine Systems submarine franchise and the Combat Systems and Technologies units provide such durable, visible cash flow.

The portfolio is unusually balanced for a defense prime. Aerospace, the Gulfstream business jet franchise, ran a 15% operating margin in Q1 with a record 38 first-quarter deliveries, and the four defense segments span submarines, combat vehicles, munitions, and IT services. That mix means GD is not a pure-play on any single program; it benefits from rising defense budgets, a strong submarine pipeline, and a healthy business-jet market at once. Management raised 2026 EPS guidance to $16.45 to $16.55 after a Q1 of $4.10. A conservatively financed prime with a record backlog and a diversified, cash-generative portfolio is the kind of name where the balance sheet underwrites the thesis.

Bear Case

The structural truth a holder should sit with is that at $350 (June 27, 2026) the price is paying for execution and growth that the static, current-earnings frames cannot support. The valuation X-ray is direct: asset-based and earnings-power models say the stock is expensive, with earnings-power value near $156 and the simple excess-return model near $171 against a $95 book value, while only the relative-multiple and growth-DCF frames justify the price. In plain terms, the market is pricing the backlog converting smoothly into rising profits, not the level of earnings GD produces today. When most of the value rests on what has not yet happened, the risk is that conversion runs slower or at lower margins than the price assumes.

The execution risk is concrete and recent. General Dynamics' largest growth engine is Marine Systems, building submarines for the Navy, and the shipbuilding industry has struggled with labor shortages, supply-chain bottlenecks, and schedule slips across the sector. A backlog is only worth its margin if the company can build to it on cost and on time, and defense shipbuilding has repeatedly proven harder than the contracts assume. On the Aerospace side, management flagged a possible minor impact on Gulfstream G280 deliveries if the Middle East conflict endures, a reminder that the business-jet franchise carries geopolitical and macro exposure that a downturn in corporate confidence would amplify.

The demand side is also more political than it looks. Defense revenue depends on government budgets, appropriations timing, and continuing-resolution risk, and a shift in the political winds or a debt-driven push to constrain spending could slow order flow even with a large backlog in hand. The IT-services segment competes in a crowded, margin-pressured market against other contractors and smaller specialists (FY2025 10-K, accession 0000040533-26-000006). At a price that already discounts strong execution, GD has little room for a shipbuilding slip, a business-jet air pocket, or a budget pause, any of which would expose how much of today's valuation is a bet on the future rather than a claim on the present.

Valuation

Inverting the $350 price puts the embedded bet at roughly 7.4% operating-income growth against a current operating margin near 10.2%, with the price-implied margin near 3.1%, a read the engine characterizes as within historical range but reliant on the backlog converting to sustained growth.

The model X-ray splits cleanly. The growth and relative frames reach or exceed the price: the perpetual-growth DCF lands near $655, the exit-multiple DCF near $500, the discounted-future-market-cap method near $346, and the relative and P/S-sector methods near $393. Against those, the static frames say expensive: earnings-power value near $156, the simple excess-return model near $171, and two-stage excess return and residual income near $227 to $229 off a $95 book value with a 16.6% trailing ROE. The blended landing across applicable methods is near $393, modestly above the price. Several trailing-earnings models carry data noise around the spin-adjusted period, so the forward and relative frames deserve more weight here.

The characterization is that the price is justified by relative-multiple and growth-DCF value while asset-based and earnings-power frames say expensive. The peer set, LMT, HII, NOC, RTX, and TXT, is the defense-prime cohort plus Textron for the aerospace overlap, where mid-to-high-teens multiples on visible backlog are normal. The investable question is the conversion: GD earns a 16.6% return on equity and holds a record $131 billion backlog, so if Marine Systems and the defense segments execute on schedule and Gulfstream margins hold near 15%, the growth frames are the right anchor. If shipbuilding slips or business-jet demand softens, the gap to the conservative frames is where the downside lives. Net debt near 1.2x operating income means the balance sheet is a cushion, not a constraint.

Catalysts

General Dynamics reported Q1 2026 on April 29, with revenue up 10.3% to $13.5 billion and EPS of $4.10, up 12%, and raised full-year 2026 EPS guidance to $16.45 to $16.55 from $16.10 to $16.20. Backlog reached $131 billion, up 48% year over year and 11% sequentially on more than $26 billion of orders and a 2:1 book-to-bill ratio, with total estimated contract value a record $188 billion. Aerospace generated $3.3 billion in revenue at a 15% operating margin with a record 38 first-quarter Gulfstream deliveries.

The near-term swing factors are submarine production cadence and Gulfstream demand. Marine Systems is the largest growth engine, so the pace at which the Navy submarine programs convert backlog to revenue, against the sector's labor and supply constraints, is the key data point to watch. On Aerospace, management flagged a possible minor impact on G280 deliveries if the Middle East conflict persists, so business-jet order flow and delivery timing are the items to monitor. Defense budgets and appropriations timing are the macro variables that govern order growth, and the steady dividend plus buybacks remain the baseline support for per-share results.

Sources: General Dynamics Q1 2026 results and call (Motley Fool transcript, GuruFocus, Aerotime, Simply Wall St, 2026); FY2025 10-K (accession 0000040533-26-000006).

Peer Cohorts (Per Segment, With Filing Citations)

Aerospace (reported)

Marine Systems (reported)

Combat Systems (reported)

Technologies (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

View the full interactive GD report on boothcheck