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TransDigm Group Incorporated (TDG) Intrinsic Value

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

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TransDigm Group Incorporated (TDG)

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Intrinsic Value (DCF)

Current$1,381.98
→
Intrinsic$726.95
-47%
$331.27$726.95$1,513.06
Current price reflects execution expectations above 25% growth — not unreasonable for quality businesses.
Range: Bear $331 → Bull $1513. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →21%23%25%27%
8%$1048$1171$1301$1440
10%$560$641$727$819
12%$302$361$425$492
14%$144$190$239$290

Bull Case

  • Bull case ($1513) offers 9% upside at 30% growth, 8% discount

Bear Case

  • Bear case ($331) implies 76% downside at 20% growth, 12% discount
  • Trading 47% above base case — execution must exceed assumptions to justify
  • Using 25% growth — aggressive, watch for mean reversion
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5-Year Free Cash Flow Projection

Year 1$2.27B
Year 2$2.84B
Year 3$3.55B
Year 4$4.43B
Year 5$5.54B
Terminal$87.82B

📐 Model Inputs

Growth Rate25.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$1.82BTTM 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 TDG stock undervalued or overvalued?
🔴 OVERVALUED

TDG trades at $1381.98 vs. our DCF-derived intrinsic value of $520.87, implying -62% downside. Using a 9.5% WACC and 25.0% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($1055.41) suggests limited upside.

What is TDG's intrinsic value?

Using a 5-year DCF model: Base FCF of $1.82B, projected at 25.0% 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 $27.22B net debt and dividing by 0.06B shares: Bear $169.03 | Base $520.87 | Bull $1055.41. Current price $1381.98 implies -62% to base case.

How is TDG's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 25.0% 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 ($57.54B).

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: 31.7x.