General Dynamics (GD) Stock | Long Term Analysis | Overvalued or Undervalued |

All right hello and welcome everybody to another stock now spear where today we’ll be talking about general dynamics ticker symbol ged now this company is traded on the new york stock exchange and in this video i want to talk about how this company generates its income i want to determine whether the stock is overvalued undervalued or fair valued i also want to give a full long term analysis on the business we will discuss intrinsic value book value income price earnings stock buybacks demands all sorts of important tangles when projecting the growth of a company and determining the true value of a stock anyway if you like this video please do like and subscribe it’s about our channel and let’s get this content out to more people so that more people can understand how gd works and also other stocks that we talk about works well on our channel anyway thank you so much for watching without further ado let’s get started so how does gd work well gd is a defense contractor meaning the government will pay gd to build military-grade equipment such as tanks and submarines to protect the united states now gd works for other countries as well and thus is also primarily through electric boat this subsidiary offers niche product development that has given cheating numerous contracts the electric boat subsidiary offers judy a competitive advantage over other defense contractors as neither lockheed martin or raytheon technologies produce submarines general dynamics recently report a record high in backlog orders essentially orders that are expected to be filled into the following years this practically guarantees income for the business as long as gd doesn’t spend more than they need to research and design these machines i have a lot of faith in the defense companies for this reason and i don’t expect gd to struggle with probability anytime soon as we will talk about in a moment the projected free cash flow intrinsic value for gd is about 144 dollars a share and we calculate this by taking the growth multiple which is just a rejected rate of growth of the company multiply this by the free cash flow which is a six year average and then add the shareholders equity which is simply the assets minus the debt of the company and then multiply that by 0.8 and divide everything by the shares that’s staying in the market in order to get the intrinsic value per share of the company in this case i think it’s better to value gd based on its discounted cash flow rather than the projected free cash flow the discount cash flow allows us to take the company’s current cash flow and discount it each year thereafter since the earnings are considered to be worth less and less due to inflation and loss interest and such then these values are added together in such a way that determines the value of the stock for gd the discount cash flow earnings based intrinsic value is 172 dollars approximately or 171.95 as displayed here which is a bit below the company’s current trading value but is relatively close suggesting that the company is trading at a relatively fair value we can see that most recently the company’s net free cash flow has been quite high as compared to previous years we can see that is at about 15 currently whereas about 10 years ago it was about seven dollars a share due to their consistent free cash flow they are able to make dividend payments without issues and offer consistent share repurchase programs to buy back their own stock and benefit shareholders currently the book value per share of gd is about 56 dollars and 40 cents this is fair in my opinion it gives the company a price to book of about 3.5 which seems to be historically fair these assets are what justify tangible value for the company and with a decent asset value like that this can help to support the trading value of the stock and prevent a significant long-term decline in trading value due to a lack of dramatic change in the intrinsic value the industry tends to trade quite a bit above the book value for and for comparison lockheed martin lmt trades with a price to buck of about 9.7 which is quite a bit above gd’s 3.5 however we also must note that raytheon technologies trades with the price to book up about 1.75 so gd seems to hold a relatively average price to book for this industry now we took a look at the companies net income we can see that gd offers a solid quarterly net income that has increased relatively steadily over the past 10 years the net income takes new account variety of factors besides earnings this can include the depreciation of assets costs of goods sold and expenses and so it’s great to see that gd has been able to grow its net income at a relatively fast rate allowing the stock to outperform large indices such as the s p 500 over the past 20 years this net income supports our expectation that gd will be able to increase its income over the long term the price earnings of this business is at about 17 this is fair for the industry and this is relatively in line with past price to earnings however it can be noted that the price earnings of gd was once around eight back in 2011 which is about half of what the price durings is today since the market is quite expensive with the dow jones having a price darings of 22 currently i consider gd to be fair value based on the current price earnings intrinsic value and book value gd has been willing to buy back their own stock consistently over the past 15 years and we can see that this is true due to the lowering of the shares outstanding in the market this chart dates back to 2006 and we can see that there has been a consistent decrease in shares outstanding this is great for shareholders and it means that each share holds a greater stake in the company naturally giving each share access to more assets more voting power and more growth potential we can see that the company currently pays a dividend of 4.76 annually with a quarterly demand of one dollar and 19 cents this demand is relatively substantial giving the shareholders a 2.39 yield on their investment through dividends this offers good income for the shareholders and they can choose whether or not to reinvest their defense in gd or invest in something else or simply use the dividend income as retirement income so overall what do we think about gd gd appears to be fair valued at the time of recording due to a relatively fair price to earnings and a solid asset value to support judy’s current trading price over the long term we expect the earnings of gd to grow with a consistently growing backlog of orders and a powerful understanding of a niche market with subsidiaries such as electric boat this company offers a considerably safe demand and a consistent stock buybacks that grow shareholder value over the long term i want to know that i am invested in gd at this time of recording and of course i am not a financial advisor or anything like that and this is not financial advice please do your own research before investing anyway thank you so much for watching if you like this video please do like and subscribe it’s about our channel and please comment down below and tell us what you think about this company we’ll try to get back to you anyway thanks again for watching and have a great day everybody.