On Jun 18, 2013, the shares of
General Dynamics Corporation
) climbed to its 52-week high of $79.48. This was primarily
driven by the company's strong booking, operational efficiency
and liquidity position.
General Dynamics is flooded with a number of contracts from
several government establishments. The comany had a total backlog
of $48.5 billion at the end of first-quarter 2013. In the recent
past, the company managed to get a few significant contracts. On
Jun 4, 2013, the company won a contract, worth $2.8 billion, from
the Department of Defense (DoD) and the U.S. Navy to construct
four Arleigh Burke-class destroyers.
As of Mar 31, 2013, General Dynamics had a cash balance of $3.74
billion and cash flow from operating activities of $0.5 billion
during the first three months of 2013. A strong financial
position enables the company to introduce new products,
repurchase shares and increase the dividend rate.
General Dynamics has rewarded shareholders by returning a
substantial portion of its free cash flow through share
repurchases and incremental dividends over the years. During
first-quarter 2013, the company repurchased 1 million outstanding
shares at an average price of $70 per share. During the quarter,
General Dynamics increased its dividend to 56 cents per share.
The company's practice of raising dividend from time to time will
benefit the stock as it attracts investor attention.
General Dynamics Canada recently introduced a small and
more-capable Airborne Acoustic Processing System, called VENOM.
This UYS-505 system leverages commercial-level advances in
hardware in order to maximize the detection of submerged threats
in deep and coastal waters.
The present valuation also makes General Dynamics attractive. The
forward price/earnings (P/E) multiple of 12.2x is lower than the
peer group average of 16.1x, reflecting a discount of 24.2%. The
price/book (P/B) multiple of 2.4x is also lower than the peer
group average of 3.0x. In addition, the company's operational
efficacy is apparent in its Return on Investment (ROI) of 14.2%,
which is higher than the peer group average of 13.3%.
General Dynamics currently has a Zacks Rank #3 (Hold). The stocks
in the industry that are worth considering include
Kratos Defense & Security Solutions, Inc.
) with a Zacks Rank #1 (Strong Buy), and
) with a Zacks Rank #2 (Buy).
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