• Investors may be wondering if Northrop Grumman at around US$611 per share still offers value, or if most of the opportunity is already priced in.
• The stock has seen a 10.1% decline over the last 7 days and a 13.6% decline over the last 30 days, even though it is up 4.3% year to date and 33.8% over the last year.
• These moves are unfolding against a backdrop of ongoing interest in defense and aerospace names, as investors reassess how long term government spending and security priorities might influence large contractors. For Northrop Grumman, these broad sector themes are an important backdrop when considering what the recent pullback could mean for long term holders.
• Right now, Northrop Grumman holds a 4 out of 6 valuation score. The rest of this article will break down how different valuation approaches interpret that score, and will finish with a way to tie all of these methods together into a clearer view of what the stock might be worth.

Approach 1: Northrop Grumman Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes estimates of the cash a company could generate in the future and discounts those cash flows back to what they might be worth today.

For Northrop Grumman, the latest twelve month free cash flow is about $3.0b. Using a 2 Stage Free Cash Flow to Equity model, analysts have supplied detailed free cash flow projections through 2030. These start at around $3.2b in 2026 and reach $3.9b in 2030. Beyond the explicit analyst window, Simply Wall St extrapolates cash flows out to 2035, with annual figures generally in the mid $3b to $4b range, all in $ terms and then discounted to today.

When all of those discounted cash flows are added together, the model arrives at an estimated intrinsic value of about $530 per share. With the current share price around $611, the DCF output suggests the stock is about 15.3% above this estimate, which screens as overvalued on this approach alone.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Northrop Grumman may be overvalued by 15.3%. Discover 58 high quality undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Northrop Grumman Price vs Earnings

For a consistently profitable company, the P/E ratio is a useful way to relate what you pay per share to the earnings that each share represents. It gives a quick sense of how many years of current earnings the market is pricing in.

What counts as a “normal” or “fair” P/E depends on expectations and risk. Higher expected earnings growth or lower perceived risk can justify a higher multiple, while slower growth or higher risk tends to support a lower one.

Northrop Grumman currently trades on a P/E of about 19x. This sits below the Aerospace & Defense industry average of around 39x and also below the peer average of roughly 38x, suggesting a discount relative to those broad comparison points.

Simply Wall St’s Fair Ratio for Northrop Grumman is about 26x. This is a proprietary view of what the P/E might be based on factors such as earnings growth profile, profit margins, industry, market cap and company specific risks. Because it blends these company level inputs, the Fair Ratio can be more tailored than a simple peer or industry comparison.

Comparing the current P/E of 19x with the Fair Ratio of 26x points to the shares trading below that model based reference point.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Northrop Grumman Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives let you attach a clear story about Northrop Grumman to the numbers you care about, link that story to a forecast for revenue, earnings and margins, and then compare your Fair Value to the live share price on Simply Wall St’s Community page. Narratives update automatically when fresh news or earnings arrive. Two investors can look at the same data yet reach very different conclusions. For example, one Narrative might lean closer to the higher analyst fair value around US$815 if it assumes stronger sector momentum and contract execution, while another might sit nearer the more cautious US$587 view if it places more weight on policy risk and contract concentration. This gives you a simple, story driven way to decide whether the current price or your own Fair Value estimate matters more for your next move.

Do you think there's more to the story for Northrop Grumman? 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.