3 Reasons Raytheon Technologies Is a Good Value Stock
Raytheon Technologies (NYSE: RTX) CEO Greg Hayes closed the third-quarter earnings call by reminding investors that two-thirds of the company's current revenue is defense related, and it would support the commercial aerospace-focused businesses through a difficult time. It's an observation investors should take note of, because it lays out the case for the stock being a very good value right now. Here's the how and why.
Industrial conglomerates can be valued in a number of different ways, and the price-to-free cash flow (FCF) metric is a commonly used one. Of course, Raytheon is an aerospace and defense play these days, so it arguably deserves a premium rating to reflect the stability of defense revenues and the long-term growth potential in commercial aviation.
Note the italics in the above paragraph, because aviation is about the long term, so investors shouldn't just be focusing on the obvious issues with the industry right now. For example, it typically takes 10 years and huge sums of money to develop an aircraft engine, which then generates aftermarket revenue for decades to come. In other words, Raytheon's aircraft engines and aerospace components should always be looked at in terms of their long-run potential, even if the next few years will be weak.
Source Fool.com
