Investment Thesis
TransDigm demonstrates exceptional operational profitability with 45.6% operating margins and strong free cash flow generation of $772M, but this is severely constrained by extreme leverage with $29.3B debt against negative $9.3B equity. The 661.8% revenue surge and flat net income growth suggest integration challenges or one-time gains, requiring clarification on earnings quality before confident recommendation.
TDG Strengths
- Exceptional operating margins at 45.6% indicate strong pricing power and operational efficiency in aerospace components
- Robust free cash flow of $772M (33.8% FCF margin) demonstrates ability to service debt despite capital structure concerns
- Solid liquidity position with 2.75x current ratio and 1.81x quick ratio providing near-term financial flexibility
- Strong revenue growth of 661.8% YoY suggests significant demand recovery or major acquisition integration
TDG Risks
- Negative stockholders equity of -$9.3B with $29.3B long-term debt creates extreme financial distress risk and technical insolvency from accounting perspective
- Disconnect between 661.8% revenue growth and flat net income (+0.0% YoY) raises serious questions about earnings quality, acquisition integration costs, or non-recurring items
- Unable to calculate meaningful ROE and debt-to-equity ratios due to negative equity, indicating balance sheet is severely impaired
- High debt burden relative to operating cash flow may constrain strategic flexibility and create refinancing risk if credit conditions deteriorate
Key Metrics to Watch
- Trend in operating margins and whether 45.6% level is sustainable or inflated by one-time items
- Reconciliation of massive revenue growth with flat net income - understand composition of $2.3B revenue
- Path to positive equity and debt reduction trajectory given $772M annual free cash flow generation
- Interest coverage ratio once stabilized, and refinancing schedule for $29.3B debt position
TDG Financial Metrics
TDG Profitability Ratios
TDG Balance Sheet & Liquidity
TDG 5-Year Financial Trend
5-Year Trend Summary: TransDigm Group INC's revenue has grown significantly by 56% over the 5-year period, indicating strong business expansion. The most recent EPS of $22.03 reflects profitable operations.
TDG Growth Metrics (YoY)
TDG Quarterly Performance
| Quarter | Revenue | Net Income | EPS |
|---|---|---|---|
| Q1 2026 | $2.0B | $445.0M | $6.62 |
| Q3 2025 | $2.0B | $382.0M | $7.96 |
| Q2 2025 | $1.9B | $382.0M | $6.97 |
| Q1 2025 | $1.8B | $382.0M | $4.87 |
| Q3 2024 | $1.7B | $228.0M | $6.14 |
| Q2 2024 | $1.6B | $228.0M | $5.32 |
| Q1 2024 | $1.4B | $228.0M | $3.33 |
| Q3 2023 | $1.4B | $163.0M | $4.10 |
Data sourced from SEC EDGAR 10-Q quarterly filings. Figures may represent quarterly or cumulative values.
TDG Capital Allocation
TDG SEC Filings
Access official SEC EDGAR filings for TransDigm Group INC (CIK: 0001260221)