- If you are wondering whether Textron's current share price reflects its underlying worth, this article walks through the key numbers that matter for value focused investors.
- Textron's stock recently closed at US$93.75, with returns of 2.9% over 7 days, 3.2% over 30 days, 7.7% year to date and 20.6% over 1 year, plus 41.5% over 3 years and 43.6% over 5 years that some investors may see as relevant when thinking about value and risk.
- Recent news coverage around Textron has centered on long term business positioning, capital allocation choices and how the company fits within the broader Aerospace & Defense sector. This helps frame how investors interpret these return figures and, together, these headlines give context to whether the current price feels justified, stretched or potentially conservative.
- On Simply Wall St's valuation checks Textron currently holds a 5 out of 6 valuation score. The sections that follow will compare several common valuation methods before finishing with a broader way to think about what the stock might be worth in your portfolio.
Find out why Textron's 20.6% return over the last year is lagging behind its peers.
Approach 1: Textron Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model takes estimates of the cash Textron could generate in the future and discounts those cash flows back to today, so you can compare that value directly with the current share price.
Textron's latest twelve month Free Cash Flow sits at about $886.9 million. Analysts and Simply Wall St's extrapolations project Free Cash Flow out to 2035, with the 2030 figure at $1,295 million. These projections are based on a 2 Stage Free Cash Flow to Equity model that uses analyst estimates for the earlier years and then extends the trend further out.
When all those future cash flows are discounted back to today's dollars, the model arrives at an intrinsic value of roughly $137.54 per share. Against the recent share price of $93.75, this implies Textron trades at a 31.8% discount, which means the stock screens as undervalued on this DCF view.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Textron is undervalued by 31.8%. Track this in your watchlist or portfolio, or discover 47 more high quality undervalued stocks.
Approach 2: Textron Price vs Earnings
For profitable companies, the P/E ratio is a useful shorthand because it links what you pay for the stock directly to the earnings that support that price. It helps you see how many dollars of share price you are paying for each dollar of current earnings.
What counts as a “normal” P/E depends on how the market views a company’s growth outlook and risk. Higher expected earnings growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk often goes with a lower P/E.
Textron trades on a P/E of 17.42x, compared with an Aerospace & Defense industry average of about 37.53x and a peer average of 70.13x. Simply Wall St’s Fair Ratio for Textron is 23.11x. This Fair Ratio is a proprietary estimate of what P/E might make sense after factoring in the company’s earnings growth profile, profit margins, risks, market cap and industry context.
Because the Fair Ratio incorporates these company specific drivers, it can be more informative than a simple comparison with peers or the broad industry, which may have very different risk and growth characteristics. With Textron trading below its Fair Ratio, the P/E based view currently indicates that the stock appears undervalued on earnings.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Textron Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so meet Narratives, a simple tool on Simply Wall St's Community page that lets you attach your own story about Textron to the numbers by linking your view on its future revenue, earnings and margins to a financial forecast. This turns that into a Fair Value, and then helps you decide what to do by comparing that Fair Value with the current price in real time as news or earnings arrive. You might lean toward a more cautious view that sees fair value around US$90.00 with revenue declining 2.6% a year and earnings reaching US$1.1b by 2029 on a 17.3x P/E, or a more optimistic view that sees fair value around US$115.00 with revenue growing 5.5% a year and earnings reaching US$1.3b by 2029 on an 18.9x P/E. There is also a middle ground narrative that anchors around the US$98.95 consensus target, 4.2% annual revenue growth and earnings of about US$1.2b.
For Textron however we will make it really easy for you with previews of two leading Textron Narratives:
Both use the same current share price reference of US$93.75 and the same core business facts, but they tell different stories about how the separation plan, aviation cycle and defense programs could play out.
That gives you a clear way to stress test your own view, rather than relying on a single fair value number.
Fair value: US$115.00
Gap between fair value and last close: Textron trades at about a 18.5% discount to this narrative fair value using ((115.0 - 93.75) ÷ 115.0).
Revenue trend used in this view: 5.50% annual growth.
- Separation of the Industrial segment and ongoing buybacks are central to the view that Textron could support a higher future P/E multiple.
- Analysts in this camp use forecasts of US$17.8b revenue and US$1.3b earnings by 2029, on a 18.9x P/E, to anchor the US$115.00 fair value.
- This narrative requires confidence that aviation, defense and new eAviation projects can support multi year growth while the company manages risks around defense exposure, competition and sustainability.
Fair value: US$90.00
Gap between fair value and last close: Textron trades about 4.2% above this narrative fair value using ((93.75 - 90.0) ÷ 90.0).
Revenue trend used in this view: revenue is assumed to decline 2.58% a year.
- This view leans on slower Industrial performance, aviation mix pressure and execution questions around separation plans, tariffs and production efficiency.
- Analysts in this camp anchor on US$14.0b revenue and US$1.1b earnings by 2029, on a 17.3x P/E, to support a US$90.00 fair value that sits below the current price.
- The focus is on whether existing growth and margin expectations already embedded in the price leave limited room for disappointment if program timelines, capital deployment or demand soften.
If the numbers in either preview feel close to how you see Textron's future, you can use them as a starting point and then adjust the revenue, margin and P/E assumptions to build a version that fits your own risk tolerance and time horizon.
See what the community is saying about Textron
Do you think there's more to the story for Textron? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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