by John Reese, editor Validea
We select stocks for our portfolio based on finding those that meet the
investment criteria of a variety of legendary investors. In this case, Northrop Grumman
) scores a 100% rating on my Kenneth Fisher-based model.
Grumman provides products, services, and integrated solutions in
aerospace, electronics, information and services to its global
The company conducts most of its business with the U.S. Government,
principally the Department of Defense (DoD) and intelligence community.
It also conducts business with local, state, and foreign governments and
Under my Fisher model, the prospective
company should have a low Price/Sales ratio. Non-cyclical
(non-Smokestack) companies with Price/Sales ratios below 0.75 are
tremendous values and should be sought.
NOC's P/S of 0.59 based
on trailing 12 month sales, is below 0.75 which is considered quite
attractive. It passes this methodology's P/S ratio test with flying
Less debt equals less risk according to this methodology. NOC's Debt/Equity of 38.20% is acceptable, thus passing the test.
prospective company should have a low Price/Sales ratio.
Non-cyclical(non-Smokestack) companies with Price/Sales ratios below .75
are tremendous values and should be sought.
NOC's P/S ratio of
0.59 is below .75 which is considered extremely attractive. It passes
this methodology's P/S ratio test with flying colors.
methodology also looks for companies that have an inflation adjusted EPS
growth rate greater than 15%. NOC's inflation adjusted EPS growth rate
of 16.28% passes the test.
This methodology looks for companies
that have a positive free cash per share. Companies should have enough
free cash available to sustain three years of losses.
based on the premise that companies without cash will soon be out of
business. NOC's free cash per share of 3.85 passes this criterion.
this methodology looks for companies that have an average net profit
margin of 5% or greater over a three year period. NOC, whose three year
net profit margin averages 7.14%, passes this evaluation.