GD
GDGeneral Dynamics is a global aerospace and defense corporation specializing in business aviation, combat vehicles, and shipbuilding.
It is a key defense contractor renowned for its technological expertise and long-term government contracts, ensuring stable revenue streams from critical national security programs.
Updated: January 14, 2026, 16:00 EST
Investment Opinion: Should I buy GD Today?
Analysis of General Dynamics (GD)
Technical Perspective: GD shows strong performance with significant outperformance against the market over recent months, trading near its 52-week high. While this suggests potential overbought conditions, the stock has demonstrated lower volatility and contained drawdowns, indicating relative stability even at elevated price levels.
Fundamental Assessment: The company maintains stable revenue with improving profitability margins and solid financial health, including manageable debt and robust cash flow. However, operational efficiency metrics like ROE and asset turnover indicate some areas for improvement in capital utilization.
Valuation & Risk Considerations: GD appears richly valued, with high EV/EBITDA and PEG ratios suggesting premium pricing relative to near-term growth expectations. Its low beta and minimal short interest highlight defensive characteristics, though reliance on government contracts introduces sector-specific cyclical risks.
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Investment Recommendation
Buy. General Dynamics presents a compelling case as a high-quality, defensive holding with strong technical momentum and sound fundamentals. Despite premium valuation metrics, its stability, consistent performance, and strategic position in the defense sector support long-term growth potential. Investors seeking lower volatility exposure to aerospace and defense may find GD suitable for a diversified portfolio.
*This is not investment advice, for reference only.*
GD 12-Month Price Forecast
RockFlow Model Forecast: Three Scenarios for 2026
Based on the comprehensive analysis provided, here is a 12-month outlook for General Dynamics (GD):
The primary catalyst for GD is its strategic positioning in the stable defense sector, underpinned by strong government contracts and a solid aerospace backlog, which should support continued revenue and cash flow stability. A key risk is the stock's premium valuation, which leaves little room for error and could lead to pressure if growth fails to meet elevated expectations or if there are unforeseen cuts to the U.S. defense budget. While the analysis notes no specific analyst target, the stock's trading near 52-week highs and low volatility suggest a potential trading range of $340 to $390 over the next year, balancing its defensive qualities against valuation constraints.
Wall Street Consensus
Most Wall Street analysts are optimistic about GD's 12-month outlook, with consensus target around $366.00, indicating expected upside potential.
Bulls vs Bears: GD Investment Factors
Overall, GD has investment potential but also faces challenges. Here are key factors to weigh before investing.
Bullish
- Strong Q3 earnings beat: Record high stock price after exceeding Wall Street expectations for Q3 results
- Bernstein price target raised: Analyst firm increased target price to $388 from $335, maintaining positive outlook
- Strong defense demand: Fueled by geopolitical tensions and increased defense spending proposals
- Gulfstream deliveries boost: Business aviation segment showing strength with solid Gulfstream aircraft deliveries
- Momentum stock status: Recognized as strong momentum stock with positive investor sentiment
Bearish
- Institutional selling pressure: Polaris Capital Management reduced holdings by 5.8% in Q3
- Valuation concerns: Questions about whether current price fairly reflects company value after strong run
- Political dependence risk: Stock performance tied to defense budget approvals and political decisions
- Market timing uncertainty: Potential overheating after five-year strong performance and recent record highs
- Concentration risk: Heavy reliance on defense contracts and government spending decisions
GD Technical Analysis
Overall Assessment: General Dynamics has demonstrated strong positive momentum with healthy returns across multiple timeframes while maintaining lower volatility than the broader market.
Short-term Performance: The stock has delivered robust gains of 6.39% over one month and 5.99% over three months, significantly outperforming the market by 2.62% indicating relative strength during this period. These consistent returns across both short-term horizons suggest sustained upward momentum.
Current Position: Trading at $363.3 places GD near its 52-week high of $367.655, representing approximately 99% of its yearly range, suggesting the stock is in overbought territory. However, the modest maximum drawdown of -10.93% over the past year indicates relatively contained downside risk despite the elevated price level.
| Period | GD Return | S&P 500 |
|---|---|---|
| 1m | +8.4% | +1.3% |
| 3m | +9.9% | +5.7% |
| 6m | +22.0% | +10.6% |
| 1y | +37.5% | +16.5% |
| ytd | +6.6% | +1.1% |
GD Fundamental Analysis
Revenue & Profitability GD demonstrates stable revenue performance with Q3 revenue of $12.9 billion, slightly down from Q2's $13.0 billion. Profit margins show improvement with net income ratio expanding from 7.78% to 8.20% quarter-over-quarter, reflecting better cost management. Operating income ratio also increased to 10.31%, indicating stronger core profitability.
Financial Health The company maintains moderate leverage with a debt-to-equity ratio of 0.42 and healthy interest coverage of 18.0x. Current ratio of 1.40 indicates adequate short-term liquidity, though the quick ratio of 0.87 suggests some reliance on inventory. Operating cash flow remains robust at $7.85 per share, supporting financial flexibility.
Operational Efficiency GD shows modest operational metrics with ROE at 4.33% and asset turnover of 0.22, indicating room for improvement in capital utilization. The 135-day cash conversion cycle reflects extended working capital requirements, though inventory turnover of 1.11 suggests adequate inventory management. Fixed asset turnover of 1.96 demonstrates reasonable utilization of property and equipment.
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Based on the provided metrics, General Dynamics appears overvalued. The trailing and forward P/E ratios in the low 20s are reasonable on the surface, but the extremely high EV/EBITDA of 61.7 and a PEG ratio of nearly 5.0 suggest the market is pricing in exceptionally high growth expectations that may not be sustainable. Furthermore, a Price-to-Book ratio of 3.99 indicates a significant premium to the company's book value. Overall, these ratios collectively point toward a premium valuation.
A peer comparison cannot be conclusively performed as the necessary industry average data is unavailable. However, the elevated PEG and EV/EBITDA ratios are typically concerning signs when compared to broad market averages, signaling that the stock's price may not be adequately supported by its current earnings growth or cash flow generation relative to general valuation benchmarks. A comprehensive assessment would require specific defense or aerospace industry multiples for context.
Investment Risk Disclosure
Based on a Beta of 0.414, General Dynamics exhibits low volatility risk relative to the broader market. This defensive characteristic suggests the stock is less sensitive to market swings, which is further supported by a manageable one-year maximum drawdown of -10.93%. This comparatively shallow decline indicates relative price stability during recent market downturns.
The apparent absence of significant short interest suggests a general market consensus regarding the company's stable outlook and reduces the near-term risk of a short squeeze. However, the primary risks for a defense contractor like General Dynamics are inherently tied to government budgetary cycles, contract awards, and execution, rather than typical market-driven factors like high short interest or liquidity concerns.
FAQs
Bullish. Strong defense demand and solid Q3 earnings are driving momentum, while low beta provides defensive stability given the stock's near 52-week highs. Suitable for long-term investors comfortable with government contract exposure, though current valuation may limit near-term upside.
Based on the provided data, GD stock appears overvalued. Key metrics like a trailing P/E of 23.1 and a PEG ratio of nearly 5.0 indicate the market is pricing in extremely high growth expectations that are not supported by its current moderate profitability (8.2% net margin) and operational efficiency (ROE of 4.33%). Compared to general market benchmarks, a PEG ratio this high is a significant warning sign, suggesting the stock price has outpaced its realistic earnings growth potential. The premium valuation is further evidenced by a Price-to-Book ratio of 3.99.
Of course. As a risk management analyst, here is an objective assessment of the key risks of holding General Dynamics (GD) stock, based on the provided information.
The primary risks are not typical market volatility, as GD is a defensive stock with low beta, but are instead tied to its core business as a defense contractor.
Here are the 3 key risks, ordered by importance:
1. Government Budget and Program Dependency Risk: As a major defense contractor, GD's revenue stability is heavily reliant on U.S. government spending decisions, where shifts in defense priorities or budgetary pressures could delay or cancel major programs, directly impacting future revenue streams. 2. Operational Execution and Contract Margin Risk: The company's improved profitability is contingent on successfully executing complex, long-term contracts, and any significant cost overruns, technical challenges, or supply chain disruptions could compress the recently expanding operating margins from 10.31%. 3. Capital Intensity and Working Capital Strain Risk: GD's business model requires significant capital, as indicated by a low asset turnover (0.22) and an extended 135-day cash conversion cycle, posing a risk that inefficient capital allocation or working capital management could pressure financial flexibility and returns (ROE 4.33%) despite currently robust operating cash flow.
Of course. Based on the provided analysis and current market context, here is a professional forecast for General Dynamics (GD) stock through 2026.
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GD Stock Forecast through 2026
1. Target Price Range: * Base Case (2026): $430 - $470 per share. This assumes moderate, mid-single-digit annual growth supported by stable defense budgets and steady execution on its aerospace backlog. * Bull Case (2026): $500 - $550 per share. This scenario requires an acceleration in defense spending, a faster-than-expected recovery in business jet demand for its Gulfstream unit, and successful margin expansion.
2. Key Growth Drivers: * Resilient Defense Backlog: As a prime contractor, GD's marquee programs (like Columbia-class submarines) provide long-term, visible revenue streams that are somewhat insulated from economic cycles. * Aerospace Recovery: The recovery of the business aviation market for its Gulfstream division represents a significant cyclical growth lever beyond its core defense business. * Budget Tailwinds: Geopolitical tensions are likely to sustain elevated U.S. and allied defense budgets, favoring well-positioned contractors like GD.
3. Main Assumptions: * U.S. defense budgets remain stable or grow modestly. * No major program cancellations or significant execution issues. * The company continues its solid execution and cost management, as indicated by its improving profit margins. * Interest rates stabilize, supporting the financing environment for Gulfstream jet sales.
4. Uncertainty & Risks: This forecast is highly sensitive to federal budget decisions and geopolitical events. The primary risks include unexpected cuts to defense spending, a prolonged downturn in the business jet market, or failure to meet margin improvement targets, which could challenge the stock's current premium valuation.
*** *Note: This forecast is for informational purposes only and does not constitute investment advice. Always conduct your own research before making any investment decisions.*