TransDigm Group Incorporated (TDG): what the price assumes

In the published model solve dated 2026-Q2, anchored at $1185.97, TransDigm Group Incorporated (TDG) is priced for +8.3% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-11.

Generated: 2026-08-31 · Source: https://boothcheck.com/report/TDG

Headline

What The Price Assumes (Inversion)

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

The operating-margin figure is value-band context at year 8: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 7.8% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

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.

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

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.7%); the inversion above states its own rate.

Per-Model Detail (n=8)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

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

Bullet Takeaways

• TransDigm makes proprietary, largely sole-source aerospace components, and the surprising part is the mix: the FY2025 10-K reports about "55% of our net sales in fiscal year 2025 were generated from the aftermarket", the higher-margin, more stable half of the business.
• That model produces a roughly 46% operating margin and $9.50 billion in trailing revenue, but it runs on debt by design, with debt-to-equity of 3.34 and $5.29 billion in trailing dividends.
• The biggest risk is the aerospace cycle: aftermarket demand tracks flight hours, so a downturn in air travel or airline capacity would hit the most profitable revenue stream directly.

Bull Case

The counterintuitive fact about TransDigm is that it is not really a manufacturer, it is a toll collector on the installed base of aircraft flying today. The FY2025 10-K states that about "55% of our net sales in fiscal year 2025 were generated from the aftermarket, the vast majority of which come from the commercial and military aftermarkets", and that these revenues "have produced a higher gross profit and have been more stable than net sales" to original-equipment makers. A company that sells a jet-engine part once to Boeing then sells the replacement for that part for the 30-year life of the airframe, at prices it largely controls, is running an annuity dressed as an industrial. That is why a parts business earns a 46% operating margin.

The moat is regulatory and economic at once. The 10-K explains that once TransDigm's part is designed onto a platform, customers "will have a reduced incentive to certify another supplier because of the cost and time of the technical design and testing certification process". Recertifying an alternative part on a flying aircraft is expensive, slow, and safety-critical, so the incumbent keeps the position and the pricing. Demand is broad, not concentrated: the top ten customers were about 40% of sales and none individually exceeded 10%, so no single airline or OEM can squeeze the company.

The momentum is real and accelerating. Fiscal Q2 2026 net sales rose 18.3% to $2,544 million with organic growth of 11.0%, and all three channels, commercial OEM, commercial aftermarket, and defense, grew double digits, with commercial transport aftermarket up 16%. Management raised full-year revenue guidance to a $10,360 million midpoint. The company converts this into cash, trailing free cash flow of $1.85 billion at 89% of net income, and returns nearly all of it: $6.14 billion of dividends and buybacks over the trailing year. The bull case is a durable-compounding machine with structural pricing power that the static valuation methods cannot frame, which is exactly why only the growth-oriented method reaches the price.

Bear Case

TransDigm's revenue is levered to where aviation sits in its cycle, and the cycle is currently near its best. The FY2025 10-K is direct that "commercial aftermarket sales increased in fiscal 2025 compared to fiscal 2024 primarily due to the overall demand for air travel resulting in higher flight hours" and rising aircraft utilization. That mechanism is a tailwind today and a trapdoor in reverse: aftermarket revenue tracks how much the global fleet flies, and flight hours fall in recessions, fuel shocks, and demand slumps. The 46% operating margin and 18% growth the market is extrapolating are being earned at a cyclical high in air traffic, and peak flight hours are not sustainable flight hours.

The balance sheet turns that cyclicality into real risk. TransDigm runs a deliberately leveraged model, debt-to-equity of 3.34, an Altman score in distress territory, and a debt stack the 10-K details across multiple term-loan tranches, including $2,500 million in new Tranche M term loans and extended Tranche K loans maturing 2030. The company paid $5.29 billion in dividends over the trailing year, a scale of payout that only works if the aftermarket cash keeps flowing. In a downturn, the fixed debt service and the appetite for special dividends collide with falling flight-hour revenue, and the equity, which sits below all that debt, absorbs the gap. About 75% of gross debt is fixed rate, which helps, but the leverage itself is the vulnerability.

The valuation leaves no room for the cycle to turn. Only the growth-oriented method reaches today's price; the asset, earnings-power, and peer-multiple lenses all read it as richly valued, the price sitting nearly four times where earnings power alone lands and well into the upper half of the sector's peer multiple range. The market is paying about 24x company-wide operating income and implicitly assuming roughly 13% operating growth sustained for years, a pace only about 48% of comparable fast-growers held for even five. The business is excellent, but excellence is fully priced, and a slowdown in air travel would compress both the aftermarket margin and the multiple at the same time, against a balance sheet built for the good times to continue.

Valuation

TransDigm is the rare name where the valuation methods almost entirely disagree with the price, and naming that disagreement is the point. At $1,291.90 (July 11, 2026), only the growth-oriented method reaches the price. The earnings-power lens reads the stock at nearly four times what current earnings power supports, the peer-multiple lens at almost three times, and the asset lens is not meaningful for a company with negative book value from years of debt-funded payouts. When every static method says richly valued and only the durable-compounding frame reaches the price, the market is paying a moat and durability premium that trailing methods structurally cannot capture. That premium is the whole valuation.

Inverting the price makes the bet legible. The market is paying about 24x company-wide operating income, embedding roughly 13% annual operating growth for five years, a pace within what TransDigm has recently delivered but demanding in duration: only about 48% of comparable fast-growers sustained it even five years, and the price sits in the upper half of the aerospace-and-defense peer multiple range. The margin requirement is the reassuring part, the business only has to hold a fraction of the 46% operating margin it already earns, so the bet is not on margin expansion but on the aftermarket annuity persisting. The FY2025 10-K grounds why that margin exists: the aftermarket is "more stable than net sales" to OEMs and carries higher gross profit, the economic engine behind the premium.

Solvency is where the leveraged model gets underwritten. The framework reads leverage as moderate and well covered on current cash flow, but the raw structure is aggressive: debt-to-equity of 3.34 across the Tranche K and Tranche M term loans the 10-K describes, with about 75% fixed rate and $857 million available under the revolver. Free cash flow of $1.85 billion covers the interest comfortably while air traffic is strong. The valuation therefore reduces to a single question: does the aftermarket keep flying at these flight-hour levels long enough to justify a price that no static method supports? The price says yes with conviction; the methods say the margin of error is thin.

Catalysts

Fiscal Q2 2026 (the quarter ended March 28, 2026) was a strong beat-and-raise. Net sales rose 18.3% to $2,544 million from $2,150 million a year earlier, with organic sales growth of 11.0% and double-digit revenue growth across all three channels: commercial OEM up 12%, commercial transport aftermarket up 16%, and defense also double digits. Adjusted earnings of $9.85 per share beat consensus, and net income rose 11.9% to about $536 million. Following the quarter, management raised full-year fiscal 2026 guidance, lifting the revenue midpoint to $10,360 million.

The forward story runs on the same levers. Aftermarket demand tracks global flight hours and aircraft utilization, so the commercial travel environment is the swing factor for the most profitable revenue. Capital deployment is the other watch item: TransDigm returned $6.14 billion through dividends and buybacks over the trailing year, including $5.29 billion of dividends, and its history of large special dividends and debt-funded acquisitions means capital-allocation announcements move the stock. The things to monitor are whether organic aftermarket growth holds in the double digits as comparisons toughen, the pace and multiples of any new acquisitions under the company's selective-acquisition strategy, and any special-dividend or refinancing action against the term-loan maturities. The next quarterly report is the immediate checkpoint.

Peer Cohorts (Per Segment, With Filing Citations)

Power & Control (reported)

• HEI (HEICO CORPORATION)
• FY2025 10-K: …misappropriation or obsolescence from occurring by developing new techniques and improving existing methods and processes, which we will continue on an ongoing basis as dictated by the technological needs of our business. We believe that, based on our competitive pricing, reputation for high quality, short lead time…
• FY2025 10-K: …modules, flash lamp drivers, laser diode drivers, arc lamp power supplies, custom power supply designs, cable assemblies, high voltage power supplies, high voltage interconnection devices and wire, high voltage energy generators, high frequency power delivery systems; memory products, including three-dimensional…
• HWM (HOWMET AEROSPACE INC.)
• FY2025 10-K: …2025-12-31 0000004281 hwm:AerospaceCommercialAndDefenseMember us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember 2025-01-01 2025-12-31 0000004281 hwm:AerospaceCommercialAndDefenseMember us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember 2024-01-01 2024-12-31 0000004281…
• FY2025 10-K: …Ciudad Acuña (2) Engine Products; Fastening Systems Aerospace Castings/Rings and Fasteners Monterrey Forged Wheels Forgings Morocco Casablanca (2) Fastening Systems Fasteners United Kingdom Exeter (2) Engine Products Aerospace and Gas Turbine Castings and Alloy Glossop Engine Products Metal, Billets Ickles Engine…
• CW (CURTISS-WRIGHT CORPORATION)
• FY2025 10-K: …avionics and electronics, flight test equipment, and aircraft data management solutions. The Naval & Power reportable segment is comprised of businesses that primarily provide products to the naval defense and power & process markets, and to a lesser extent, the aerospace defense markets. The products offered include…
• FY2025 10-K: …production orders to begin materializing by the middle of the next decade. General Industrial We derive revenue from our widely diversified offering to the general industrial market, which primarily consists of electronic sensors and control systems, electro-mechanical actuation, and surface treatment services. We…
• MOG-A (MOOG Inc.)
• FY2025 10-K: …weakness identified above. The Company's internal control remediation efforts include the following: i) Design and implement targeted controls that address the completeness and accuracy of the inputs used in recognizing revenue and contract losses for the group of contracts described in the material weakness…
• FY2025 10-K: …misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Buffalo, New York November 26,…
• LOAR (Loar Holdings Inc.)
• FY2025 10-K: …of the internal control over financial reporting of Beadlight Ltd. and LMB Fans & Motors. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related…
• FY2025 10-K: …could harm our business, financial condition and results of operations; pursuant to the Voting Agreement, Abrams Capital, GPV Loar LLC, Dirkson Charles and Brett Milgrim directly control a majority of the voting power of the shares of our common stock eligible to vote in the election of our directors, and their…
• WWD (WOODWARD, INC.)
• FY2025 10-K: …with our competitors through ownership or joint venture agreements. For example, Pratt & Whitney, one of our customers, is affiliated with RTX Corporation, one of our competitors. Similarly, GE Aerospace has a joint venture with Parker Hannifin for the supply of fuel nozzles. We have also partnered with our customers…
• FY2025 10-K: …depots, third-party repair shops, and other end users. 2 Industrial Our Industrial segment designs, produces, and services systems and products for the management of energy in the form of fuel, air, fluids, gases, motion, combustion, and electricity. These products include actuators, valves, pumps, fuel injection…
• TDY (TELEDYNE TECHNOLOGIES INC)
• FY2025 10-K: …to evaluate the release rate characteristics and physical properties of various dosage forms to ensure the safety and efficacy of medicines worldwide. Finally, we manufacture fixed and portable industrial gas and flame detection instruments used in a variety of industries, including petrochemical, power generation,…
• FY2025 10-K: …including traffic generators and emulators, to accurately and reliably monitor and test high data-rate communication interfaces and diagnose operational problems in a wide range of systems and devices to ensure that they comply with industry standards, including in the areas of cloud computing, data storage and…

Airframe (reported)

• HEI (HEICO CORPORATION)
• FY2025 10-K: …and business aircraft, aircraft engines and related components and equipment. Due in large part to our established industry presence, we enjoy strong customer relations, name recognition and repeat business. We sell our products to a broad customer base consisting of domestic and foreign commercial and cargo…
• FY2025 10-K: …one year later. Early adoption is permitted. The adoption of this guidance will not affect the Company's consolidated results of operations, financial position or cash flows and the Company is currently evaluating the effect the guidance will have on its disclosures. 69 Index 2. ACQUISITIONS Wencor Acquisition On…
• HWM (HOWMET AEROSPACE INC.)
• FY2025 10-K: …are excluded from net margin and Segment Adjusted EBITDA. The Company's CODM considers forecast-to-actual variances for Segment Adjusted EBITDA when allocating resources across the Company's reportable segments. Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Differences…
• FY2025 10-K: …aerospace and defense applications and is vertically integrated to produce titanium forgings, titanium extrusions, and machining services for airframe, wing, aero-engine, and landing gear components. Engineered Structures also produces aluminum forgings, nickel forgings, and aluminum machined components, and…
• CW (CURTISS-WRIGHT CORPORATION)
• FY2025 10-K: …90% of our sales in this market and are highly dependent on new aircraft production from our primary customers, Boeing and Airbus. We have significant content on the majority of the commercial aircraft programs, where our business is more leveraged to narrowbody (~60%) than widebody (~40%) commercial aircraft. We…
• FY2025 10-K: …2025-01-01 2025-12-31 0000026324 country:US us-gaap:OtherPensionPlansPostretirementOrSupplementalPlansDefinedBenefitMember cw:ParentCompanysRetirementBenefitPlanMember 2025-01-01 2025-12-31 0000026324 us-gaap:OperatingSegmentsMember cw:AerospaceIndustrialMember 2025-01-01 2025-12-31 0000026324…
• MOG-A (MOOG Inc.)
• FY2025 10-K: …and existing fleets. Commercial Aircraft. We design, manufacture and integrate primary and secondary flight-critical control systems and products for various commercial aircraft including widebody, narrowbody, business jets and regional jets for both OEM and aftermarket customers. Our large commercial production…
• FY2025 10-K: ,854 123,864 Industrial Automation 401,697 443,580 485,502 Simulation and Test 141,551 155,889 124,980 Medical 270,654 253,823 248,378 Industrial 955,581 991,146 982,724 Net sales $ 3,860,624 $ 3,608,960 $ 3,316,190 Customer Type 2025 2024 2023 Net sales: Commercial $ 187,528 $ 172,829 $ 112,777 U.S. Government…
• LOAR (Loar Holdings Inc.)
• FY2025 10-K: …processes necessitate significant time and monetary investments from both suppliers and customers, leaving little incentive for either party to repeat these processes once a product is already certified on a platform. Accordingly, we believe that these high barriers to entry provide us with additional growth…
• FY2025 10-K: …any single customer, and no more than 7% of our 2025 net sales came from any single aircraft platform. We believe that our revenue diversification provides significant resiliency, and it positions us well to take advantage of new business opportunities. We believe that our efforts to serve our customers effectively…
• TDY (TELEDYNE TECHNOLOGIES INC)
• FY2025 10-K: 2025-12-28 0001094285 us-gaap:OperatingSegmentsMember tdy:AerospaceAndDefenseElectronicsMember 2024-12-30 2025-12-28 0001094285 us-gaap:OperatingSegmentsMember tdy:EngineeredSystemsMember 2024-12-30 2025-12-28 0001094285 us-gaap:OperatingSegmentsMember 2024-12-30 2025-12-28 0001094285 us-gaap:CorporateNonSegmentMember…
• FY2025 10-K: 2023-12-31 0001094285 tdy:OtherCountiresMember 2025-12-28 0001094285 tdy:OtherCountiresMember 2024-12-29 0001094285 tdy:OtherCountiresMember 2023-12-31 0001094285 tdy:InstrumentationMember 2025-12-28 0001094285 tdy:DigitalImagingMember 2025-12-28 0001094285 tdy:AerospaceAndDefenseElectronicsMember 2025-12-28…
• HXL (HEXCEL CORP /DE/)
• FY2025 10-K: …components used in rotorcraft blades, engine nacelles, and aircraft surfaces (flaps, wings, elevators and fairings) RF Interference Control  Military and aerospace applications Net sales for the Engineered Products segment to third-party customers were $377.7 million in 2025, $372.0 million in 2024, and $314.8…
• FY2025 10-K: …produced as further discussed under the captions "Significant Customers", "Markets" and "Management's Discussion and Analysis of Financial Condition and Results of Operations". Engineered Products The Engineered Products segment manufactures and markets composite structures and precision machined honeycomb parts…

Non-aviation (reported)

• HEI (HEICO CORPORATION)
• FY2025 10-K: …and business aircraft, aircraft engines and related components and equipment. Due in large part to our established industry presence, we enjoy strong customer relations, name recognition and repeat business. We sell our products to a broad customer base consisting of domestic and foreign commercial and cargo…
• FY2025 10-K: …aircraft and business jets for services such as emergency exit lighting, emergency fuel shut-off, power door assists, cockpit voice recorders and flight computers. Additionally, we design, manufacture and repair flight deck annunciators, panels and indicators. We design and manufacture next generation wireless cabin…
• LOAR (Loar Holdings Inc.)
• FY2025 10-K: …and purposefully constructed a highly diverse portfolio, which we believe positions us well to succeed in a variety of market conditions. Our diversified revenue base is designed to reduce our dependence on any particular product, platform, or market sector, and we believe it has been a significant factor in our…
• FY2025 10-K: …were more than 30,000 commercial jet aircraft in service, compared to 17,712 commercial jet aircraft in service in 2010, and industry consultants project that future demand requires 49,000 commercial aircraft in service by 2044. The commercial aftermarket has historically produced consistent revenue. In our…
• TDY (TELEDYNE TECHNOLOGIES INC)
• FY2025 10-K: …countermeasures, weapon systems, space, wireless and satellite communications and terminals and test equipment. We provide onboard avionics systems and ground-based applications that allow civil and military aircraft operators to access, manage and utilize their data more efficiently. Our products include aircraft…
• FY2025 10-K: ; technological changes; • the political environment of oil-producing regions; • the price and availability of alternative fuels; and • climate change regulations that provide incentives to conserve energy, use electric vehicles or use alternative energy sources, or that impose restrictions on the development and…
• SARO (StandardAero, Inc.)
• FY2025 10-K: …to and reviewed by the CODM on a consolidated basis to evaluate cost efficiency and company level performance. The Company's Engine Services segment provides a full suite of aftermarket services, including maintenance, repair and overhaul, on-wing and field service support, asset management, and engineering and…
• FY2025 10-K: …information to measure our performance. Please refer to "Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Key Performance Indicators and Non-GAAP Financial Measures" for an explanation on why we use these non-GAAP financial measures, their definitions, their…
• AIR (AAR CORP)
• FY2025 10-K: Our business activities in this segment are primarily conducted through AAR Supply Chain, Inc.; AAR Government Services, Inc.; AAR Aircraft Services, Inc.; AAR International, Inc.; Trax USA CORP.; and AAR Airlift Group, Inc. Expeditionary Services The Expeditionary Services segment primarily consists of products and…
• FY2025 10-K: …and services are domestic and foreign passenger airlines, domestic and foreign cargo airlines, regional and commuter airlines, business and general aviation operators, OEMs, aircraft leasing companies, aftermarket aviation support companies, the DoD and its contractors, the DoS, and foreign military organizations or…
• HWM (HOWMET AEROSPACE INC.)
• FY2025 10-K: …2025-12-31 0000004281 hwm:AerospaceCommercialAndDefenseMember us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember 2025-01-01 2025-12-31 0000004281 hwm:AerospaceCommercialAndDefenseMember us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember 2024-01-01 2024-12-31 0000004281…
• FY2025 10-K: …with innovative solutions through offering differentiated products such as airfoils with advanced cooling and coatings for extreme temperature applications; specially-designed fasteners for lightweight composite airframe construction, reduced assembly costs, and lightning strike protection; and lightweight aluminum…
• CW (CURTISS-WRIGHT CORPORATION)
• FY2025 10-K: …90% of our sales in this market and are highly dependent on new aircraft production from our primary customers, Boeing and Airbus. We have significant content on the majority of the commercial aircraft programs, where our business is more leveraged to narrowbody (~60%) than widebody (~40%) commercial aircraft. We…
• FY2025 10-K: …avionics and electronics, flight test equipment, and aircraft data management solutions. The Naval & Power reportable segment is comprised of businesses that primarily provide products to the naval defense and power & process markets, and to a lesser extent, the aerospace defense markets. The products offered include…
• MOG-A (MOOG Inc.)
• FY2025 10-K: …and existing fleets. Commercial Aircraft. We design, manufacture and integrate primary and secondary flight-critical control systems and products for various commercial aircraft including widebody, narrowbody, business jets and regional jets for both OEM and aftermarket customers. Our large commercial production…
• FY2025 10-K: …• Commercial aircraft market - primary and secondary flight controls and components for commercial aircraft. • Space market - satellite avionics, propulsion and positioning controls and components, launcher thrust vector controls and components, as well as integrated space vehicles. In the industrial market, our…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

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.