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General Dynamics Corporation (GD) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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General Dynamics Corporation (GD)

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Intrinsic Value (DCF)

Current$368.69
→
Intrinsic$211.68
-43%
$131.50$211.68$371.26
Market implies 22% growth for 5 years
Current price reflects execution expectations above 10% growth — not unreasonable for quality businesses.
At $369, the market prices in continued strong cash flow growth (22%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $132 → Bull $371. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →6%8%10%12%
8%$267$294$324$355
10%$174$192$212$232
12%$125$138$153$168
14%$95$105$116$128

Bull Case

  • Bull case ($371) offers 1% upside at 12% growth, 8% discount
  • Conservative 10% growth assumption is achievable based on track record

Bear Case

  • Bear case ($132) implies 64% downside at 8% growth, 12% discount
  • Price reflects 22% growth expectations vs 10% historical — high bar to clear
  • Trading 43% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$3.51B
Year 2$3.86B
Year 3$4.24B
Year 4$4.66B
Year 5$5.12B
Terminal$81.17B

📐 Model Inputs

Growth Rate9.9%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$3.20BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is GD stock undervalued or overvalued?
🔴 OVERVALUED

GD trades at $368.69 vs. our DCF-derived intrinsic value of $211.68, implying -41% downside. Using a 9.5% WACC and 9.9% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($314.71) suggests limited upside.

What is GD's intrinsic value?

Using a 5-year DCF model: Base FCF of $3.20B, projected at 9.9% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $8.98B net debt and dividing by 0.28B shares: Bear $138.44 | Base $211.68 | Bull $314.71. Current price $368.69 implies -41% to base case.

How is GD's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 9.9% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($67.72B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 21.2x.