Value
5.7/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 7.2 |
| P/S | 9.1 |
| EV/EBITDA | 4.2 |
| Fwd P/E | 6.8 |
| PEG | 3.0 |
| Analyst target | 5.0 |
- ▸Forward P/E: 18.7x
- ▸PEG: 4.14
NOC · Why this verdict
Why Northrop Grumman (NOC) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results. How we score · Editorial policy
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VerdictSELL
Overall score5.1/10
ConfidenceHIGH
MacroRISK_OFF
TrendMatrix Research · core thesis
Engine thesis — one sentence
Northrop Grumman has delivered four consecutive earnings beats and a 29% return on equity with strong peer-relative valuation, but a confirmed death-cross technical pattern, high US government customer concentration of 84%, and below-average free cash flow quality present meaningful risks for new buyers.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Northrop has beaten earnings estimates in all 4 of the last 4 quarters, with the most recent two beats exceeding 18%, indicating the company is consistently delivering above analyst expectations on program execution and cost management. Earnings | Earnings beats continue in at least 3 of the next 4 quarters with positive surprises above 5%. | →Stable |
| CounterDefense contractor earnings beats often reflect program timing and milestone billing rather than true operational acceleration, and the high PEG of 4.06 suggests limited growth to justify the beat pattern. | ||
Approximately 84% of Northrop Grumman's revenue comes from the US government, making the company's financial performance highly dependent on federal defense budget decisions, continuing resolutions, and potential sequestration events. Bear case | Non-US-government revenue grows to represent at least 20% of total revenue within 24 months through international defense contract wins. | ↓Deteriorating |
| CounterUS government concentration provides extraordinary revenue visibility and stability since defense contracts are multi-year, and the current geopolitical environment supports sustained or growing defense spending. | ||
A confirmed death-cross is blocking a buy signal with a hard gate failure, and the stock's momentum score of 4.1 is below the minimum threshold of 4.5, with on-balance volume declining, indicating institutional distribution rather than accumulation. Engine gate (failed) | The death cross resolves into a golden cross within 5 months as the price recovers above the 200-day moving average. | ↑Improving |
| CounterMACD is improving and RSI at 46 is not yet oversold, suggesting the death cross may be in the early stages of resolution, particularly if defense spending news acts as a catalyst. | ||
Northrop Grumman's return on equity of 29% is rated as excellent and places it among the top-performing peers in the aerospace and defense sector, reflecting efficient capital deployment on its defense programs. Quality breakdown | Return on equity remains above 25% over the next 12 months as program profitability sustains current capital efficiency. | ↑Improving |
| CounterHigh ROE in defense contractors is often supported by negative tangible book equity from pension obligations and buybacks rather than genuine business quality improvement. | ||
Northrop has beaten earnings estimates in all 4 of the last 4 quarters, with the most recent two beats exceeding 18%, indicating the company is consistently delivering above analyst expectations on program execution and cost management.
→StableEarnings
- Expectation
- Earnings beats continue in at least 3 of the next 4 quarters with positive surprises above 5%.
CounterDefense contractor earnings beats often reflect program timing and milestone billing rather than true operational acceleration, and the high PEG of 4.06 suggests limited growth to justify the beat pattern.
Approximately 84% of Northrop Grumman's revenue comes from the US government, making the company's financial performance highly dependent on federal defense budget decisions, continuing resolutions, and potential sequestration events.
↓DeterioratingBear case
- Expectation
- Non-US-government revenue grows to represent at least 20% of total revenue within 24 months through international defense contract wins.
CounterUS government concentration provides extraordinary revenue visibility and stability since defense contracts are multi-year, and the current geopolitical environment supports sustained or growing defense spending.
A confirmed death-cross is blocking a buy signal with a hard gate failure, and the stock's momentum score of 4.1 is below the minimum threshold of 4.5, with on-balance volume declining, indicating institutional distribution rather than accumulation.
↑ImprovingEngine gate (failed)
- Expectation
- The death cross resolves into a golden cross within 5 months as the price recovers above the 200-day moving average.
CounterMACD is improving and RSI at 46 is not yet oversold, suggesting the death cross may be in the early stages of resolution, particularly if defense spending news acts as a catalyst.
Northrop Grumman's return on equity of 29% is rated as excellent and places it among the top-performing peers in the aerospace and defense sector, reflecting efficient capital deployment on its defense programs.
↑ImprovingQuality breakdown
- Expectation
- Return on equity remains above 25% over the next 12 months as program profitability sustains current capital efficiency.
CounterHigh ROE in defense contractors is often supported by negative tangible book equity from pension obligations and buybacks rather than genuine business quality improvement.
Per-dimension breakdown
Quality
5.1/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 8.7 |
| ROA | 4.7 |
| Gross margin | 0.0 |
| Op margin | 5.2 |
| Net margin | 5.2 |
| Current ratio | 4.7 |
| FCF quality | 5.3 |
| Moat | 5.4 |
| Piotroski F | 6.7 |
- ▸Excellent ROE: 26%
- ▸Earnings quality warning: 70% FCF/NI
- ▸No competitive moat
Growth
3.4/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 4.2 |
| EPS growth | 2.6 |
Momentum
6.3/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 2.4 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 6.0 |
| Volume | 3.1 |
- ▸Overbought bear rally (RSI 80)
- ▸Volume accumulation (rising OBV)
- ▸Below 200-MA, MA slope -1.4%/30d — confirmed downtrend
Sentiment
6.7/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 7.5 |
| Price target | 6.9 |
| erm sentiment | 5.4 |
Insider
3.8/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 3.3 |
| notable moves | 3.0 |
- ▸Negligible insider selling — $52,015 (0.000% of mkt cap)
Peer rank
5.1/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 8.7 |
| quality rank | 8.2 |
| growth rank | 1.3 |
- ▸Attractive P/E vs peers
- ▸Superior ROE vs peers
Technical
3.0/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 1.4 |
| support resistance | 0.7 |
| 52w position | 4.7 |
| gap | 5.0 |
Risk (lower is worse)
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 9.2 |
| days to cover | 8.5 |
| volatility | 5.7 |
| put call | 0.0 |
| implied vol | 7.1 |
| max pain risk | 3.0 |
| debt equity | 5.4 |
- ▸Elevated put/call: 2.02
- ▸Above max pain $430
- ▸Concentration risks: 1 HIGH (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
6.9/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 6.0 |
| dividend safety | 8.5 |
- ▸Perfect beat streak: 4Q
- ▸Dividend aristocrat: 1.8% yield
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (7)
- MOMENTUM:6.3>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:87d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:0.1<1.5@spot
Warning (1)
- DEATH_CROSS:momentum=6.3>=5.0 recovering
Reward-to-Risk
0.12
Upside
+1.8%
Downside
15.0%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 80
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 3.9 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Catalyst at 6.9) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:0.1<1.5@spot) reinforce the read. Current asymmetry R:R is 0.12 — supplementary context, not the trigger for this path.
The strongest dimensions are Catalyst at 6.9, Sentiment at 6.7, and Momentum at 6.3; the weakest are Technical at 3.0, Growth at 3.4, and Insider at 3.8. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of 0.12 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Government Customer Concentration
Trip ifDefense budget appropriations fall below prior-year levels, causing management to lower full-year revenue guidance by more than 5%.
- P2Consecutive Earnings Beat Streak
Trip ifEarnings surprise falls below 0% in at least 2 of the next 4 quarters.
- P3Death Cross Momentum Blockage
Trip ifPrice drops below $500 while still in a confirmed death-cross pattern.
- P4Excellent Roe Peer Ranking
Trip ifReturn on equity falls below 20% for 2 consecutive quarters.