GD
GD
Strong Buy 2026-04-21
Model
DCF
Price at Report
$332.14
Base IV
$587.71
Bear IV
$366.47
Bull IV
$901.62
Entry Zone: 348-541 · Sell Above: 766
Bore Family Office
Valuation Report — General Dynamics Corporation (GD) • April 21, 2026
Unlevered DCF (FCFF @ WACC) • Discount Rate: 5.69% • Current Price: $332.14
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
General Dynamics Corporation (NYSE: GD) is a leading U.S. defense contractor organized into four core segments: Aerospace (Gulfstream business jets), Marine Systems (submarines, surface combatants), Combat Systems (ground vehicles, weapons), and Technology Systems (mission systems, IT). Founded in 1954 and headquartered in West Falls Church, VA, GD is one of the Pentagon's most trusted suppliers with long-cycle program visibility extending 5-10 years.
GD's Gulfstream franchise is the global leader in business aviation — producing the largest installed base of purpose-built business jets with 40%+ operating margins. The defense businesses benefit from structural budget entrenchment: submarine and surface ship programs are architect-engineered to specific Navy requirements with no commercial substitutes. GD's competitive moat is regulatory and technical, not cyclical.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Aerospace (Gulfstream) | $12,500M | 24% | +15.0% | — | Business jets; 40%+ operating margins; record backlog |
| Marine Systems | $13,200M | 25% | +8.0% | — | Submarines, destroyers; Columbia-class SSBN; Navy shipbuilding |
| Combat Systems | $10,600M | 20% | +5.0% | — | Ground vehicles, Archer artillery; Abrams modernization |
| Technology Systems | $16,250M | 31% | +10.0% | — | IT, mission systems, cyber; government IT spending |
| Blended Growth Rate | — | 100% | +9.7% | — | Weighted avg across segments |
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | 14.0% | ≥12% strong |
| FCF Margin | 7.5% | 5–10% adequate |
| Debt / EBITDA | 2.4x | 2–4x moderate |
| Revenue Trend | Growing 3yr | 3-year directional trend |
| FCF Margin Trend | Stable (±1pp) | Directional margin trajectory |
| Analyst Revisions | Upward revisions | Last 90 days consensus direction |
✅ Quality profile supports the valuation
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $38,469 | $39,407 | $42,272 | $47,716 | $52,550 |
| Rev YoY Growth | — | +2.4% | +7.3% | +12.9% | +10.1% |
| Gross Margin | — | — | — | — | — |
| EBITDA ($M) | $5,053 | $5,095 | $5,108 | $5,682 | $6,280 |
| EBITDA Margin | 13.1% | 12.9% | 12.1% | 11.9% | 12.0% |
| Operating Income ($M) | $4,163 | $4,211 | $4,245 | $4,796 | $5,356 |
| Operating Margin | 10.8% | 10.7% | 10.0% | 10.1% | 10.2% |
| Net Income ($M) | $3,257 | $3,390 | $3,315 | $3,782 | $4,210 |
| Net Margin | 8.5% | 8.6% | 7.8% | 7.9% | 8.0% |
| EPS (diluted) | $11.55 | $12.19 | $12.02 | $13.63 | $15.45 |
| Free Cash Flow ($M) | $3,384 | $3,465 | $3,806 | $3,196 | $3,959 |
| Annual DPS | $4.760 | $5.040 | $5.280 | $5.680 | $6.000 |
| Total Debt ($M) | $11,900 | $13,100 | $13,400 | $14,200 | $15,000 |
💹 Capital Return & Share Count Analysis
Net Share Change
-3.5% (2021→2025)
📉 Net reduction — buybacks exceed issuances
EPS Amplification
EPS grew +33.8% vs net income +29.3% over the period — +4.5pp of EPS growth amplified by share reduction.
| Year | Diluted Shares (M) | YoY Change | Buyback Spend ($M) | Buyback Yield |
|---|---|---|---|---|
| 2021 | 282.0M | — | $1,200 | 1.3% |
| 2022 | 278.0M | -1.4% | $1,800 | 1.9% |
| 2023 | 276.0M | -0.7% | $500 | 0.5% |
| 2024 | 277.0M | +0.4% | $1,400 | 1.5% |
| 2025 | 272.0M | -1.8% | $1,600 | 1.8% |
GD has bought back $500M-$1.8B annually, keeping share count flat-to-declining despite strong FCF. The balance sheet capacity for buybacks is large. Dividend has grown 65+ consecutive years.
📈 DCF Scenarios
$366
🔴 Bear
$588
📊 Base
$902
🚀 Bull
$332.14
Current Price
$375
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | WACC | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 3.0% | 2.0% | 2.0% | 5.69% | $366 | ▲10.3% |
| 📊 Base | 6.0% | 3.5% | 2.7% | 5.69% | $588 | ▲76.9% |
| 🚀 Bull | 9.0% | 5.0% | 3.0% | 5.69% | $902 | ▲171.5% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 3.0% | Stage 2: 2.0% | Terminal: 2.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $4.10B | $3.88B | $3.88B |
| Year 2 ✦ | Stage 1 | $4.20B | $3.76B | $7.64B |
| Year 3 ✦ | Stage 1 | $4.35B | $3.68B | $11.32B |
| Year 4 ✦ | Stage 1 | $4.45B | $3.57B | $14.89B |
| Year 5 ✦ | Stage 1 | $4.60B | $3.49B | $18.38B |
| Year 6 | Stage 2 | $4.69B | $3.37B | $21.74B |
| Year 7 | Stage 2 | $4.79B | $3.25B | $24.99B |
| Year 8 | Stage 2 | $4.88B | $3.13B | $28.12B |
| Year 9 | Stage 2 | $4.98B | $3.02B | $31.15B |
| Year 10 | Stage 2 | $5.08B | $2.92B | $34.07B |
| Terminal | — | TV=$140.2B | PV(TV)=$80.6B (70% of EV) | EV=$114.7B |
| Intrinsic Value | — | — | EV $114.7B − Net Debt → Equity / Shares | $366 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (5.69%) to get its present value. After Year 10, FCF grows at the terminal rate (2.0%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $140.2B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $80.6B). Enterprise Value = PV of FCFs ($34.1B) + PV of TV ($80.6B) = $114.7B. Subtracting net debt gives equity value of $99.7B, divided by shares outstanding = $366 per share.
Base Scenario
Stage 1: 6.0% | Stage 2: 3.5% | Terminal: 2.7%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $4.30B | $4.07B | $4.07B |
| Year 2 ✦ | Stage 1 | $4.65B | $4.16B | $8.23B |
| Year 3 ✦ | Stage 1 | $5.00B | $4.23B | $12.47B |
| Year 4 ✦ | Stage 1 | $5.35B | $4.29B | $16.75B |
| Year 5 ✦ | Stage 1 | $5.70B | $4.32B | $21.07B |
| Year 6 | Stage 2 | $5.90B | $4.23B | $25.31B |
| Year 7 | Stage 2 | $6.11B | $4.14B | $29.45B |
| Year 8 | Stage 2 | $6.32B | $4.06B | $33.51B |
| Year 9 | Stage 2 | $6.54B | $3.97B | $37.48B |
| Year 10 | Stage 2 | $6.77B | $3.89B | $41.37B |
| Terminal | — | TV=$232.2B | PV(TV)=$133.5B (76% of EV) | EV=$174.9B |
| Intrinsic Value | — | — | EV $174.9B − Net Debt → Equity / Shares | $588 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (5.69%) to get its present value. After Year 10, FCF grows at the terminal rate (2.7%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $232.2B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $133.5B). Enterprise Value = PV of FCFs ($41.4B) + PV of TV ($133.5B) = $174.9B. Subtracting net debt gives equity value of $159.9B, divided by shares outstanding = $588 per share.
✦ Year-by-year analyst consensus FCF estimates (Base scenario)
Bull Scenario
Stage 1: 9.0% | Stage 2: 5.0% | Terminal: 3.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $4.70B | $4.45B | $4.45B |
| Year 2 ✦ | Stage 1 | $5.30B | $4.74B | $9.19B |
| Year 3 ✦ | Stage 1 | $5.90B | $5.00B | $14.19B |
| Year 4 ✦ | Stage 1 | $6.70B | $5.37B | $19.56B |
| Year 5 ✦ | Stage 1 | $7.40B | $5.61B | $25.17B |
| Year 6 | Stage 2 | $7.77B | $5.57B | $30.74B |
| Year 7 | Stage 2 | $8.16B | $5.54B | $36.28B |
| Year 8 | Stage 2 | $8.57B | $5.50B | $41.78B |
| Year 9 | Stage 2 | $8.99B | $5.46B | $47.24B |
| Year 10 | Stage 2 | $9.44B | $5.43B | $52.67B |
| Terminal | — | TV=$361.1B | PV(TV)=$207.6B (80% of EV) | EV=$260.2B |
| Intrinsic Value | — | — | EV $260.2B − Net Debt → Equity / Shares | $902 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (5.69%) to get its present value. After Year 10, FCF grows at the terminal rate (3.0%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $361.1B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $207.6B). Enterprise Value = PV of FCFs ($52.7B) + PV of TV ($207.6B) = $260.2B. Subtracting net debt gives equity value of $245.2B, divided by shares outstanding = $902 per share.
🔲 Sensitivity Table
| WACC \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 3.7% | $846 | $1069 | $1477 | $2470 | $8428 |
| 4.2% | $676 | $810 | $1024 | $1415 | $2366 |
| 4.7% | $559 | $647 | $776 | $981 | $1356 |
| 5.2% | $474 | $535 | $620 | $744 | $940 |
| 5.7% | $409 | $454 | $513 | $595 | $713 |
| 6.2% | $358 | $392 | $435 | $492 | $570 |
| 6.7% | $317 | $343 | $376 | $417 | $472 |
| 7.2% | $283 | $304 | $329 | $360 | $400 |
| 7.7% | $254 | $271 | $291 | $315 | $346 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $11.55 | — | — | — | Actual |
| 2022 | $12.19 | — | — | — | Actual |
| 2023 | $12.02 | — | — | — | Actual |
| 2024 | $13.63 | — | — | — | Actual |
| 2025 | $15.45 | — | — | — | Actual |
| 2026 | $15.00 | $16.20 | $17.50 | 15 | Estimate |
| 2027 | $16.00 | $17.50 | $19.00 | 14 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $38.5B | — | — | — | Actual |
| 2022 | $39.4B | — | — | — | Actual |
| 2023 | $42.3B | — | — | — | Actual |
| 2024 | $47.7B | — | — | — | Actual |
| 2025 | $52.5B | — | — | — | Actual |
| 2026 | $54.0B | $56.0B | $58.5B | 15 | Estimate |
| 2027 | $56.0B | $59.0B | $62.0B | 14 | Estimate |
(c) Individual Analyst Price Targets
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| David Strauss | Wells Fargo | Buy | $400 | +20.4% |
| Sheila Kahyaoglu | Jefferies | Hold | $380 | +14.4% |
| John Godyn | Citigroup | Hold | $380 | +14.4% |
💡 Investment Thesis
- Structural defense spend: GD programs (submarines, nuclear deterrence) are architect-engineered to specific government requirements. Columbia-class SSBN and Virginia-class submarines are multi-decade commitments with no near-term substitute. Budget cuts are politically difficult.
- Gulfstream record backlog: Gulfstream delivered 53 aircraft in 2025 vs. ~50 in 2024. Backlog is multi-year. Business aviation demand is resilient — UHNW individuals treat private jets as productivity tools, not luxury.
- FCF conversion is exceptional: GD converts nearly all net income to FCF (FY2025: $4,210M NI, $3,959M FCF — 94% conversion). Low capex requirements once programs are in production. This is a cash cow in a stable phase.
- 65-year dividend growth streak: GD has grown dividends for 65+ consecutive years (Dividend Aristocrat). The payout ratio of 37% is sustainable. Buybacks have been deployed opportunistically.
- Attractive at these levels: At $332, GD trades at ~21x trailing EPS and ~18x forward EPS. The Bear case ($300) is ~$315 in present value terms. At $332, modest upside to Base IV of $375 — but the quality of the franchise and FCF profile justify holding.
👔 Management Quality & Culture
CEO: Not identified
Net Insider Buys (12m)
-354,580 shares
Incentive Alignment
⚠️ Moderate
Employee Ratings
Culture Signal
Mixed
Sources: Finnhub insider data · Brave Search (Glassdoor, Indeed, Comparably, news) · Earnings surprise data from analyst forecasts · Qualitative signals are directional only.
⚖️ DCF Verdict: Strong Buy — General Dynamics Corporation (GD)
Current price: $332.14 | Analyst Avg PT: $375.33
$366
🔴 Bear
$588
📊 Base
$902
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$541 | Begin position |
| Tier 2 — Add | ≤$477 | Add on weakness |
| Tier 3 — Full | ≤$348 | Full allocation |
| Sell Alert | ≥$766 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Verdict: Strong Buy. The current price of $332.14 sits at or below the bear-case value of $366, implying an unusually favorable downside/upside setup. Tier 1 begins at or below $541, with full allocation reserved for $348 or better.
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| Model Choice — DCF | GD is a mature defense contractor with strong FCF generation. DPS ($6.00) is only 39% of FCF/share ($14.53) — FCF >> DPS, so DCF is the appropriate model. DDM on DPS alone would wildly understate intrinsic value. |
| WACC Build | Ke = 4.25% + 0.334 × 5.5% = 6.08%. Gross debt ~$15B, market cap $90.6B. We = 85.8%, Wd = 14.2%. Kd = 4.2% × (1-21%) = 3.32%. WACC = 0.858 × 6.08% + 0.142 × 3.32% = 5.69%. |
| FCF Estimates — Analyst Consensus | FY2025 FCF was $3,959M (+23.9% YoY). FY2026 consensus implies ~8-10% growth to $4,300-4,400M. Model uses analyst FCF estimates as top-level fallback. |
| Bear Case — Defense Budget Risk | The bear case reflects DOGE-era federal spending cuts. Even if non-defense is cut, nuclear submarine and deterrence programs are largely protected. Bear case still produces $300+ — downside is bounded. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.