HhDefense contractor Northop Grumman fell hard toward trend line support both before and after its earnings report last Friday, despite a solid beat of analyst expectations. The fall has occurred as analysts adjusted forward estimates of earnings and sales downward for the next two years. Despite the downward revisions, Northop Grumman remains a growth company, with PEG ratio of 1.8.
The share price has fallen much faster than earnings expectations, making NOC a very attractive buy as it approaches support. Let's look at NOC's current price ratios compared to its three-year median price ratios on earnings dates. Here is the implied upside from the current price ratio to the median price ratios on earnings dates over the last three years:
P/E: 21%
Fwd P/E: 18%
P/S: 17%
Fwd P/S: 21%
P/D: 17%
Fwd P/D: 23%
P/B: 31%
P/FCF: 81%
Sentiment on NOC is positive, with an 8.3/10 analyst summary score (average rating Buy). The news environment for the company is good, thanks to several US government contracts recently signed, and several others recently successfully completed. Open interest on NOC is about evenly split between bulls and bears, but the 30-day average of trading volume favors the bulls.
NOC is nearing support from July lows and a seven-month trend line . I will look to make a buy around 287.
