Today we're going to take a closer look at large-cap Industrials company L3Harris Technologies, whose shares are currently trading at $206.6. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:
L3Harris Technologies, Inc., an aerospace and defense technology company, provides mission-critical solutions for government and commercial customers worldwide. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 22.19 and an average price to book (P/B) ratio of 4.06. In contrast, L3Harris Technologies has a trailing 12 month P/E ratio of 26.6 and a P/B ratio of 2.1.
L3Harris Technologies's PEG ratio is 14.81, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Increasing Revenues but Narrowing Margins:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $6,182 | $6,801 | $12,856 | $17,814 | $17,062 | $18,657 |
| Revenue Growth | n/a | 10.01% | 89.03% | 38.57% | -4.22% | 9.35% |
| Operating Margins | 18% | 16% | 12% | 10% | 11% | 10% |
| Net Margins | 11% | 14% | 10% | 10% | 6% | 8% |
| Net Income (MM) | $702 | $953 | $1,347 | $1,847 | $1,062 | $1,489 |
| Net Interest Expense (MM) | $170 | $188 | $217 | $439 | $425 | $401 |
| Earnings Per Share | $5.76 | $7.86 | $7.89 | $9.09 | $5.49 | $7.800000000000001 |
| EPS Growth | n/a | 36.46% | 0.38% | 15.21% | -39.6% | 42.08% |
| Diluted Shares (MM) | 121 | 120 | 169 | 203 | 194 | 184 |
| Current Ratio | 1.27 | 1.49 | 1.37 | 1.4 | 1.17 | 0.88 |
| Total Debt (MM) | $3,819 | $6,966 | $6,929 | $7,061 | $7,050 | $13,541 |
L3Harris Technologies has growing revenues and increasing reinvestment in the business, positive EPS growth, and irregular cash flows. However, the firm has a highly leveraged balance sheet. Finally, we note that L3Harris Technologies has average net margins with a negative growth trend.
