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Morgan Stanley analysts reiterated an Overweight rating on TransDigm Group (NYSE:TDG), raising the price target on the stock to $1,000 from $793 in a note to clients Monday.
The aerospace and defence company’s profits growth from greater OE and aftermarket volumes, pricing, and the multiple expansion potential as it closes the valuation gap with rival Heico are all undervalued by the market, according to the analysts.
The analysts stated, “We view TransDigm (TDG) as the most tenable business model in commercial aerospace.” For US corporations with a market capitalization of $20 billion or more, “the company has the second highest margin within the Industrials GICS.”
According to them, TDG has “overcome short thesis after short thesis over the last decade,” therefore they do not anticipate the issues to come up again.
So far this year, TDG shares are up more than 26%, while it has gained more than 44% in the last 12 months.
The analysts said, “TDG is a popular stock, but we anticipate seeing TDG’s multiples increase as the market acknowledges its unbreakable winning business model, excellent earnings potential, and capital deployment upside from increased leverage.
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