{"id":534554,"date":"2024-07-10T11:58:19","date_gmt":"2024-07-10T15:58:19","guid":{"rendered":"https:\/\/financhill.com\/blog\/?p=534554"},"modified":"2024-07-09T23:32:01","modified_gmt":"2024-07-10T03:32:01","slug":"is-huntington-ingalls-a-good-stock-to-buy","status":"publish","type":"post","link":"https:\/\/financhill.com\/blog\/investing\/is-huntington-ingalls-a-good-stock-to-buy","title":{"rendered":"1 Massive Military Shipbuilder To Watch"},"content":{"rendered":"

Huntington Ingalls Industries, Inc. (<\/b>NYSE:HII<\/b><\/a>)<\/b> shares have returned a modest 6% over the past twelve months but that might be on the cusp of changing.<\/span><\/p>\n

As the biggest military shipbuilder in America, Huntington has a history<\/span> spanning 135 years<\/span><\/a> supporting US defenses. And it<\/span>s programs are backed by strong bipartisan support. <\/span><\/p>\n

This was evident in the last Defense Appropriations Act that funds Arleigh Burke-class destroyers, Virginia-class attack submarines, and a Columbia-class ballistic submarine. <\/span>The act also provides $500 million for advanced procurement of an amphibious warship, called LPD 33. <\/span><\/p>\n

The capital infusion highlights how key a role Huntington’s shipbuilding plays in US defenses, and ensures a constant supply of contracts and income.<\/span><\/p>\n

With stable revenues and support broadly from Congress, the long-term future looks bright for Huntington but what about the share price?<\/span><\/p>\n

Huntington Free Cash Flow Forecasts Bright<\/b><\/h2>\n

Sales and service revenues in Q1 2024<\/span> rose by 4.9% to $2.81 billion<\/span><\/a> year-over-year. Operating income also increased at a growth rate of 9.2% from the prior year to $154 million.<\/span><\/p>\n

Net earnings and earnings per share increased also by 18.6% and 19.8%, respectively. In absolute terms, the figures ended up at $153 million and $3.87 per share. <\/span><\/p>\n

Besides solid sales, the Mission Technologies segment of Huntington has remained highly successful in landing contracts with $80 million in the pipeline.<\/span><\/p>\n

Additionally, Huntington has begun the year well and anticipates free cash flow of between<\/span> $600 million and $700 million<\/span><\/a>. The cash flow projection highlights the company’s financial stability and ability to finance future growth.<\/span><\/p>\n

Better yet, the 5-year free cash flow is forecast to be $3.6 billion, indicating predictable and stable financials for the foreseeable future. <\/span><\/p>\n

1 Standout Feature of Huntington<\/b><\/h2>\n

Huntington stands out on one key dimension, its fundamentals. The company has a perfect Piotroski Score of 9, indicating rock solid financials.<\/p>\n

That’s also evident in the 12-year dividend growth streak. As an aside, the dividend now sits at 2.15% but what’s arguably more attractive is the low payout ratio of just 28.6% that indicates substantial room for increases over time.<\/p>\n

Across a host of measures, Huntington looks really good. For example, the price-to-earnings ratio is just 13.5x, meaningfully below the 15x line in the sand that Buffett is widely regarded as favoring.<\/p>\n

With net income set to increase at an annualized pace of 6.8% over the next 5 years, it’s clear that the PEG ratio is appetizing, to say the least. The PEG is just 0.54 and suggests that the earnings multiple is low relative to the growth rate.<\/p>\n

Is Huntington Ingalls a Good Stock to Buy?<\/b><\/h2>\n

The price target of $285.54 per share set by 13 analysts collectively suggests Huntington Ingalls is a good stock to buy with meaningful upside of 19.9%.<\/p>\n

Whether we look at a discounted cash flow forecast or analysts price targets, the results are similar. A DCF calculation for example reveals fair value of close to $282 per share.<\/p>\n

That is no surprise really when you look to the bottom line that has been consistently profitable for as far back as we can see. To be clear, a 10-year analysis reveals the stock has been profitable in each and every year.<\/p>\n

Over that same time frame, the share price has risen from around $70 per share to current levels around 3x higher. This is very much a slow and steady play that tends to carve out gains year after year with good predictability but don’t expect it to surprise to the upside akin to a company like Nvidia. <\/p>\n

If there were a major drawback to the stock it would be relative lack of earnings growth and the gross margins that aren’t stellar. This is more like a company that spits out profits with high predictability and is usually, though not always, free cash flow positive. <\/p>\n

It’s not the type of stock that generally incurs many upside or downside surprises, so for those who want exposure to the defense industry, and prefer a steady eddy, this might well be the right fit.<\/p>\n","protected":false},"excerpt":{"rendered":"

Huntington Ingalls Industries, Inc. (NYSE:HII) shares have returned a modest 6% over the past twelve months but that might be on the cusp of changing. As the biggest military shipbuilder in America, Huntington has a history spanning 135 years supporting US defenses. And its programs are backed by strong bipartisan support. This was evident in […]<\/p>\n","protected":false},"author":2,"featured_media":534564,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"content-type":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[22],"tags":[313,1460,1562,355,318],"class_list":["post-534554","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-amzn","tag-gd","tag-hii","tag-nwsa","tag-tgt"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/financhill.com\/blog\/wp-content\/uploads\/2024\/07\/Untitled-design-2024-07-09T212825.243.jpg","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p9czeV-2f3Q","_links":{"self":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts\/534554","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/comments?post=534554"}],"version-history":[{"count":11,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts\/534554\/revisions"}],"predecessor-version":[{"id":534566,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts\/534554\/revisions\/534566"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/media\/534564"}],"wp:attachment":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/media?parent=534554"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/categories?post=534554"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/tags?post=534554"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}