Northrop Grumman Corporation

Analysis of Northrop Grumman (NOC)

Technical Analysis NOC exhibits exceptional bullish momentum, significantly outpacing the market with gains of 7.1% over one month and 23.7% over three months. Trading near its 52-week high of $715, the stock shows sustained institutional interest and resilience, supported by a low Beta of 0.039 that reduces correlation to broader market swings. The modest maximum drawdown of -15.56% over the past year suggests controlled volatility, reinforcing the current uptrend.

Fundamentals Revenue growth from $10.4B to $11.7B in Q4 2025 highlights operational strength, though profitability is mixed with a declining operating margin offset by a healthy net margin of 12.2%. Financial health remains solid, with manageable leverage (debt-to-equity of 1.18) and robust operating cash flow per share of $27.27. However, operational efficiency metrics like ROE (8.6%) and asset turnover (0.23) indicate room for improvement in capital utilization.

Valuation NOC’s forward P/E of 14.3 and PEG ratio of 0.48 suggest the stock is undervalued relative to its growth outlook, despite elevated multiples like P/B (5.97). The lack of peer comparison data limits context, but standalone metrics point to reasonable valuation given earnings growth expectations.

Risk Assessment With a near-zero Beta, NOC demonstrates low volatility risk and minimal dependence on market fluctuations. The modest maximum drawdown and absence of significant short interest further support a stable risk profile, typical of established defense contractors.

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Investment Recommendation

NOC presents a compelling buy case, combining strong technical momentum, solid revenue growth, and an undervalued PEG ratio that signals attractive growth potential. Its low correlation to market volatility and healthy cash flow generation provide downside resilience, though investors should monitor operational efficiency improvements. For long-term investors seeking exposure to the defense sector, NOC’s current trajectory and valuation justify consideration.

*Note: This is not investment advice, for reference only.*

RockFlow Model Forecast: Three Scenarios for 2026

Based on a comprehensive analysis, the 12-month outlook for Northrop Grumman (NOC) is positive, supported by strong secular trends in defense spending.

Key catalysts include sustained demand driven by geopolitical tensions and the company's key role in next-generation programs like the B-21 Raider bomber and the Sentinel ICBM, which should continue to fuel revenue growth. The stock's low beta and demonstrated resilience provide a stable foundation.

Potential risks primarily involve execution challenges on large, complex programs and potential budget pressures or delays from protracted government appropriations processes. Internally, weaker operational efficiency metrics (ROE, asset turnover) remain an area to watch.

While a specific analyst target is not available, the stock's current momentum trading near its high, combined with an attractive PEG ratio suggesting undervaluation relative to growth, points to a constructive path. A reasonable target range could see the stock testing new highs, potentially in the $740-$780 range, contingent on successful program execution and stable defense budgets.

Wall Street Consensus

Most Wall Street analysts are optimistic about Northrop Grumman Corporation's 12-month outlook, with consensus target around $736.87, indicating expected upside potential.

Overall, NOC has investment potential but also faces challenges. Here are key factors to weigh before investing.

NOC has demonstrated exceptional performance with sustained upward momentum and significant outperformance versus the broader market. The stock shows strong bullish characteristics across multiple timeframes with remarkable consistency in its advance.

The stock has delivered impressive short-term gains, rising 7.1% over one month and surging 23.71% over three months, substantially outperforming the market by 23.73%. This strong momentum indicates sustained institutional interest and positive sentiment driving the stock higher despite its unusually low beta of 0.039, suggesting minimal correlation with broader market volatility.

Currently trading at $701.12, NOC sits near its 52-week high of $715.61, positioned in the upper quartile of its yearly range. Given the proximity to all-time highs and the modest maximum drawdown of -15.56% over the past year, the stock appears to be in an extended bullish phase rather than technically overbought, supported by consistent fundamental strength.

Revenue & Profitability NOC demonstrated sequential revenue growth from $10.4B to $11.7B in Q4 2025, yet profitability metrics showed mixed signals. The net margin expanded to 12.2% despite a slight contraction in gross margin to 19.6% from the prior quarter's 21.4%. However, operating income declined significantly as higher other expenses compressed the operating margin to 8.9% from 11.9% in Q3.

Financial Health The company maintains moderate leverage with a 38.4% debt ratio and 1.18 debt-to-equity ratio, though interest coverage remains adequate at 5.9x. Cash flow generation appears robust with operating cash flow per share of $27.27, supporting a healthy cash conversion cycle of 49.5 days and indicating solid working capital management.

Operational Efficiency NOC's operational efficiency shows room for improvement, with ROE at 8.6% and asset turnover of 0.23 suggesting modest capital utilization. The fixed asset turnover of 0.91 indicates moderate efficiency in deploying property and equipment, while the 68-day sales outstanding period points to slightly extended receivables collection.

Based on the available metrics, Northrop Grumman appears to present a mixed valuation picture. The forward P/E of 14.3 suggests a more reasonable valuation compared to the trailing P/E of 23.8, indicating an expectation of significant earnings growth. Furthermore, the PEG ratio of 0.48, being significantly below 1.0, strongly implies the stock is undervalued when its growth prospects are considered, despite a high P/B ratio of 5.97 and a very elevated EV/EBITDA multiple.

A conclusive peer comparison cannot be performed due to the unavailability of industry average data. This lack of context makes it impossible to determine if NOC's valuation multiples, such as its forward P/E or EV/EBITDA, are attractive or expensive relative to the broader defense and aerospace sector. Therefore, the analysis is limited to an absolute assessment of the standalone metrics.

Volatility Risk: The stock exhibits exceptionally low volatility risk, as evidenced by its near-zero Beta of 0.039, indicating its price movements are largely independent of the broader market. However, its one-year maximum drawdown of -15.56% reveals it can still experience moderate, albeit contained, downside moves over periods of market stress.

Other Risks: The absence of reported short interest suggests negligible pressure from bearish speculation or short squeezes. This, combined with characteristics typical of a large-cap defense contractor, generally implies stable ownership and adequate liquidity, reducing certain trading-related risks.