• Wondering whether Textron at around US$91.37 is offering good value right now, or if the easy money has already been made.
• The stock is up 22.8% over the past year and 44.1% over three years. However, it is down 1.4% over the last week and 3.5% over the past month, with a 5.0% gain year to date.
• Recent headlines around Textron have focused on its position in capital goods and aerospace and defense, with attention on how the company is positioned against peers and broader industry trends. This context helps frame why the stock has moved the way it has in the short and medium term, and why investors are paying close attention to current pricing.
• On Simply Wall St's valuation checks, Textron scores a 5 out of 6. This sets up a closer look at how traditional tools like P/E and discounted cash flow compare to a more complete way of thinking about value that will be covered at the end of this article.

Approach 1: Textron Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a stock could be worth by projecting future cash flows and discounting them back to today using a required rate of return.

For Textron, the model used is a 2 Stage Free Cash Flow to Equity framework, built on cash flow projections in $. The latest twelve month free cash flow is about $886.9 million. Analyst estimates and subsequent extrapolations run out to 2035, with Simply Wall St extending beyond the initial analyst window. By 2030, projected free cash flow is $1,295.0 million, with each year’s cash flow discounted back to reflect the time value of money.

Adding the discounted ten year projections together and including the terminal value leads to an estimated intrinsic value of about $137.09 per share. Compared with the current share price around $91.37, the DCF output implies the stock is trading at roughly a 33.4% discount, which points to the shares looking undervalued on this specific cash flow model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Textron is undervalued by 33.4%. Track this in your watchlist or portfolio, or discover 46 more high quality undervalued stocks.

Approach 2: Textron Price vs Earnings

For a profitable company like Textron, the P/E ratio is a useful way to relate what you pay for each share to the earnings that the business is currently generating. Investors usually accept a higher P/E when they expect stronger earnings growth or see lower risk, and a lower P/E when growth expectations are more modest or risks are higher.

Textron currently trades on a P/E of about 17.0x. That sits well below the Aerospace & Defense industry average of about 39.6x and the broader peer average of roughly 42.4x. Simply Wall St also calculates a proprietary “Fair Ratio” for Textron of 23.0x. This is the P/E level that would typically be expected given factors such as its earnings growth profile, profit margins, industry, market value and risk characteristics.

This Fair Ratio is more tailored than a simple peer or industry comparison because it is specific to Textron’s own fundamentals rather than relying on broad group averages that may include very different businesses. Comparing Textron’s current P/E of 17.0x with its Fair Ratio of 23.0x indicates that, within this framework, the stock is trading below what would be considered a reasonable level.

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 set out your own story for Textron by linking assumptions about future revenue, earnings and margins to a fair value, then comparing that fair value with today’s price while the system keeps updating it when new news or earnings arrive.

For Textron, one investor might align with a more optimistic Narrative that points to a fair value around US$115.0, based on expectations for revenue of US$17.8b, earnings of US$1.3b and a future P/E of 18.9x by 2029. Another might prefer a more cautious Narrative around US$90.0 fair value that assumes revenue of US$14.0b, earnings of US$1.1b and a future P/E of 17.4x. Seeing these side by side helps you decide whether the current price of about US$91.37 fits your own view of the story.

For Textron however we will make it really easy for you with previews of two leading Textron Narratives:

Fair value in this bullish Narrative: US$115.00

The gap between this fair value and the current price of about US$91.37 works out to roughly 20.6% below the Narrative fair value, so the stock would need to rise around that amount to meet this view.

Revenue growth assumption: 5.50%

• Backlog and demand in defense helicopters and business jets are expected to support revenue, margins and earnings across the aviation and defense segments.
• Investment in sustainable aviation, unmanned systems and hybrid electric technologies is expected to broaden Textron’s opportunity set and support multi year growth, while normalization in supply chains supports margins and cash flow.
• This view lines up with the more optimistic analyst group, who anchor on about US$17.8b of revenue, US$1.3b of earnings and an 18.9x P/E by 2029, using an 8.5% discount rate.

Fair value in this cautious Narrative: US$90.00

The gap between this fair value and the current price of about US$91.37 works out to roughly 1.5% above the Narrative fair value, so the stock is framed as slightly ahead of this view.

Revenue growth assumption: 2.68% decline per year

• Slower Industrial segment trends, pressure in Textron Aviation mix and potential tariff and trade headwinds are expected to weigh on margins and earnings.
• Execution risks around production, certifications and profit recovery, including strike recovery and new program ramps, keep expectations for earnings growth more muted.
• This view lines up with the more cautious analyst group, who anchor on about US$14.0b of revenue, US$1.1b of earnings and a 17.4x P/E by 2029, using an 8.1% discount rate and a fair value of US$90.00 that sits just below the current share price.

Seeing both Narratives side by side gives you a clear sense of the trade off between upside potential and execution risk. From here, the key step is deciding which set of revenue, margin and valuation assumptions most closely matches your own expectations for Textron and your tolerance for uncertainty.

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.