Financial media took a generally downbeat view of General Dynamics'
True, the company failed to match the superb performance of shipbuilding rival Northrop Grumman
More importantly, General D gave investors a cause to hope that last quarter's weakness will give way to better times ahead. Funded backlog rose 3% year over year in Q1, nearing $47.4 billion. And at the rate this company eats revenue, total backlog alone would keep General Dynamics in business for another two years at least, even if it didn't sign a single new contract.
And by one measure at least, business actually improved. Free cash flow for the quarter, while seasonally weak, still topped $150 million. That's more than twice the $73 million the company generated in last year's Q1. The General has now amassed a trailing 12-month total of more than $2.5 billion in free cash flow, 5% beyond what its GAAP-calculated "earnings" suggest. In other words, General Dynamics did just fine last quarter. It wasn't a blowout success like the one warbot-maker iRobot
What ranks above "general"?
Unfortunately, after gaining 44% over the past 12 months, and trouncing the S&P's performance, I think the General is due for some R&R. At today's price, the stock commands a 12.6-times earnings multiple, and 12 times free cash flow. That's not a horrible valuation by any means. But it looks only middling-good based on consensus estimates of 7.8% long-term growth, and its healthy 2.2% dividend.
"Just fine" performance isn't no longer good enough to justify reupping on General Dynamics today. Not when you've got Raytheon
But can you really find better values in today's market? You can. We have. They're here.