The profitability has increased in recent years while the stock continues to trade below its historical average valuation and the GF Value
Shares of aerospace and defense company General Dynamics
Corporation (NYSE:GD) have declined 18.5% year-to-date and sit more than 24%
off the 52-week high.
The company's aerospace segment has been weak over the past
few quarters as new orders for Gulf Stream jets have slowed. With the economy
in a delicate position due to the coronavirus pandemic, private jet orders have
been out as well.
Covid-19 has also impacted General Dynamics' Information
Technology business as business travel and site access resulted in a 13%
year-over-year decline in the most recent quarter. These two segments account
for almost half of the company's total business.
This helps explain the decline that has occurred in the
stock in 2020. However, for investors with a horizon that spans longer than a
few quarters, this could be an excellent opportunity to add General Dynamics to
their portfolio.
Eventually, a recovery from Covid-19 will take place, which
should ease the pressure on both the Aerospace and Information Technology
segments. General Dynamics should benefit from increased defense spending that
is occurring both in the U.S. and around the world.
Even with the headwinds it is facing, General Dynamics is a
highly profitable company that I consider to be undervalued at the moment.
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