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Northrop Grumman Corporation (NOC) Intrinsic Value

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

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Northrop Grumman Corporation (NOC)

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Intrinsic Value (DCF)

Current$654.61
→
Intrinsic$396.11
-39%
$233.88$396.11$718.78
Market implies 28% growth for 5 years
Current price reflects execution expectations above 16% growth — not unreasonable for quality businesses.
At $655, the market prices in continued strong cash flow growth (28%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $234 → Bull $719. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →12%14%16%18%
8%$517$570$627$687
10%$324$359$396$436
12%$221$247$274$304
14%$158$178$200$222

Bull Case

  • Bull case ($719) offers 10% upside at 20% growth, 8% discount

Bear Case

  • Bear case ($234) implies 64% downside at 13% growth, 12% discount
  • Price reflects 28% growth expectations vs 16% historical — high bar to clear
  • Trading 39% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$3.05B
Year 2$3.56B
Year 3$4.14B
Year 4$4.82B
Year 5$5.62B
Terminal$89.03B

📐 Model Inputs

Growth Rate16.5%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$2.62BTTM 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 NOC stock undervalued or overvalued?
🔴 OVERVALUED

NOC trades at $654.61 vs. our DCF-derived intrinsic value of $396.11, implying -35% downside. Using a 9.5% WACC and 16.5% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($642.14) suggests limited upside.

What is NOC's intrinsic value?

Using a 5-year DCF model: Base FCF of $2.62B, projected at 16.5% 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 $14.04B net debt and dividing by 0.15B shares: Bear $230.10 | Base $396.11 | Bull $642.14. Current price $654.61 implies -35% to base case.

How is NOC's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 16.5% 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 ($72.39B).

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: 27.6x.