Northrop Grumman (NOC) vs. Its Peers Critical Review

Northrop Grumman (NYSE:NOC) is one of 229 public companies in the “Aerospace & Defense” industry, but how does it weigh in compared to its competitors? We will compare Northrop Grumman to similar businesses based on the strength of its risk, dividends, profitability, analyst recommendations, earnings, valuation and institutional ownership.

Dividends

Northrop Grumman pays an annual dividend of $9.88 per share and has a dividend yield of 1.8%. Northrop Grumman pays out 31.2% of its earnings in the form of a dividend. As a group, “Aerospace & Defense” companies pay a dividend yield of 1.1% and pay out 38.4% of their earnings in the form of a dividend. Northrop Grumman has increased its dividend for 22 consecutive years. Northrop Grumman is clearly a better dividend stock than its competitors, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares Northrop Grumman and its competitors top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Net Income	Price/Earnings Ratio
Northrop Grumman	$41.95 billion	$4.18 billion	17.25
Northrop Grumman Competitors	$8.35 billion	$569.54 million	21.45

Northrop Grumman has higher revenue and earnings than its competitors. Northrop Grumman is trading at a lower price-to-earnings ratio than its competitors, indicating that it is currently more affordable than other companies in its industry.

Profitability

This table compares Northrop Grumman and its competitors’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Northrop Grumman	10.37%	23.46%	8.06%
Northrop Grumman Competitors	-347.37%	-49.14%	-4.39%

Risk and Volatility

Northrop Grumman has a beta of -0.13, meaning that its stock price is 113% less volatile than the S&P 500. Comparatively, Northrop Grumman’s competitors have a beta of 1.42, meaning that their average stock price is 42% more volatile than the S&P 500.

Insider & Institutional Ownership

83.4% of Northrop Grumman shares are held by institutional investors. Comparatively, 49.5% of shares of all “Aerospace & Defense” companies are held by institutional investors. 0.2% of Northrop Grumman shares are held by insiders. Comparatively, 11.8% of shares of all “Aerospace & Defense” companies are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Northrop Grumman and its competitors, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Northrop Grumman	1	9	15	0	2.56
Northrop Grumman Competitors	2164	8282	12816	582	2.50

Northrop Grumman presently has a consensus price target of $643.74, suggesting a potential upside of 17.74%. As a group, “Aerospace & Defense” companies have a potential upside of 30.44%. Given Northrop Grumman’s competitors higher possible upside, analysts plainly believe Northrop Grumman has less favorable growth aspects than its competitors.

Summary

Northrop Grumman beats its competitors on 10 of the 15 factors compared.

About Northrop Grumman

Northrop Grumman Corporation is a U.S.-based aerospace and defense company that develops and produces systems for government and commercial customers. Its business spans aeronautics, defense, mission technologies and space, including military aircraft, autonomous systems, missile and air-defense capabilities, sensors, communications and satellites. The company is the prime contractor for the B-21 Raider and is developing the Sentinel intercontinental ballistic missile system. It also supplies technologies and components for other defense programs, as well as launch vehicles, propulsion systems and spacecraft.