Jana Partners Invests in TransDigm Group

Company has been expanding operations while running a healthy business

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Jun 23, 2016
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Jana Partners (Trades, Portfolio) purchased a stake in TransDigm Group Inc. (TDG, Financial) in the first quarter.

TransDigm Group was formed in 2003. The company designs, produces and supplies engineered aircraft components for use on commercial and military aircraft in service. The company's products include mechanical/electromechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, NiCad batteries and chargers, engineered latching and locking devices, rods and locking devices, engineered connectors and elastomers, cockpit security components and systems, specialized cockpit displays, aircraft audio systems, specialized lavatory components, seatbelts and safety restraints, engineered interior surfaces, lighting and control technology and military personnel parachutes and cargo delivery systems. The company's business segments are Power & Control, Airframe and Nonaviation.

TransDigm Group is also traded in Germany and the U.K.

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TransDigm Group has a market cap of $14.01 billion, a P/E ratio of 30.43, an enterprise value of $21.73 billion and a quick ratio of 1.66.

According to GuruFocus TransDigm Group has a strong 9/10 profitability and growth rating, and the company is continuing to expand.

According to an article on prnewswire.com TransDigm Group annouced that it has successfully completed the acquisition of ILC Holdings Inc. The acquisition was announced on May 24 but was not completed until June 23. You can access the complete article by clicking here.

It is a good sign that TransDigm Group is successfully expanding its operations. The company also operates its business in a healthy fashion. TransDigm Group has a Piotroski F-Score of 8 of 8, which indicates a healthy business situation for the company. TransDigm Group also has consistent revenue growth, free cash flow and EBITDA growth over the previous 10 years.

The company has increased its revenue growth by 17.90% and its EBITDA growth by 18.30% in the last 10 years; over the previous five years the company has been able to increase its free cash flow by 20.10%. These good signs combined with the company scoring an 8 of 8 Piotroski F-Score all indicate that TransDigm Group is a profitable long-term investment.

According to the book "Security Analysis," sixth edition, Fairholme Capital Management founder Bruce Berkowitz (Trades, Portfolio) says that “To value equities, we at Fairholme begin by calculating free cash flow.” Calculating free cash flow is an important statistic to analyze when looking at investing in securities for the long term. The free cash flow is a good sign because TransDigm Group has been able to successfully expand its operations while remaining cash flow positive.

Below is a Peter Lynch chart for TransDigm Group.

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Conclusion

TransDigm Group has been able to successfully expand its operations. The company is conducting its business operations in a healthy fashion, with a Piotroski F-Score of 8 of 8. TransDigm Group has been improving its financial statements in terms of revenue growth and EBITDA growth as well as free cash flow growth. All of these factors may have influenced Jana Partners (Trades, Portfolio) to purchase 365,845 shares of TransDigm Group during the first quarter.

Jana Partners (Trades, Portfolio) LLC is an investment firm specializing in event-driven investing. The firm was founded in 2001 by Barry Rosenstein, who currently serves as Jana’s managing partner and co-portfolio manager. Jana Partners (Trades, Portfolio) LLC applies a fundamental value discipline to identify undervalued companies that have one or more specific catalysts to unlock value. The firm invests, long and short, in companies undergoing or expected to undergo change. Jana Partners (Trades, Portfolio) LLC currently owns 29 stocks with a total value of $5,267 million.

Cheers to your investment success.

Disclosure: Author does not currently own any shares of this company.

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