RTX Corporation (RTX)

Conclusion

RTX Corporation is a US aerospace and defense group with three segments: Collins Aerospace, Pratt & Whitney and Raytheon. At a price of 196.31 USD on 9 November 2026, its market capitalisation is 264.9 billion USD.

The verdict is overvalued. The fair value band runs from 114.29 to 171.43 USD with a midpoint of 142.86 USD, giving a margin of safety of -27.2% at the current price. The DCF gives 108.88 USD per share, and the fair value from historical multiples is 176.84 USD. Price multiples sit above their historical medians on earnings, sales and book value, with a P/E of 31.1 against a median of 28.0. The reverse DCF implies growth of 12.2%, which is 2.9 points above the 9.4% five-year revenue CAGR as given, and the five-year FCF per share CAGR of 35.4% is shown separately.

The case rests on cash generation and earnings consistency. The TTM FCF conversion of 107.0% and the Piotroski score of 8 out of 9 are the strongest numbers, alongside net debt to EBITDA of 1.8x. The weakest are the price to book ratio of 3.83 against a median of 1.98, a current ratio of 1.05, and ROIC of 10.2% against a WACC of 8.2%. A further rise in the price, or slower cash growth, would widen the gap to the fair value band.

Financial health

Financial strength is yellow: net debt to EBITDA of 1.8x supports the balance sheet, while the current ratio of 1.05, interest coverage of 7.8x and the Altman Z-score of 2.78 hold it back. The current ratio is 1.05 and the quick ratio is 0.38 as of 30 September 2026. Debt to equity is 0.56 and net debt to EBITDA is 1.8x on a TTM basis. Interest coverage is 7.8x. The Altman Z-score is 2.78, in the grey zone; the model was designed for manufacturers, and RTX is one. Insolvency risk: low, about 0.3% by the estimate of the Ohlson model over one to two years. Debt to revenue growth over five years is -5.9%.

Earnings quality

Earnings quality is green, with all four tests passed: cash conversion, low accruals, the Piotroski score and the Beneish reading. Free cash flow conversion is 107.0% on a TTM basis and 111.1% over five years. The accrual ratio is -0.023, and stock-based compensation is 1.3% of revenue, leaving free cash flow after SBC of 7.9 billion USD. The share count has fallen slightly over five years, with a CAGR of -0.02%, a sign of minimal dilution. The Piotroski score is 8 out of 9. The Beneish M-score of -2.41 is in the unlikely range. RTX beat earnings estimates in all 8 of the last quarters, with an average surprise of 13.99%. Estimate revisions are positive: the current year was revised up 6.7% over 90 days and the next year up 3.1%.

Profitability

Profitability is yellow. Margins are above their ten-year medians, but ROIC is only modestly above the cost of capital. The TTM operating margin is 11.8% against a median of 8.3%, and the net margin is 8.9% against a median of 7.6%. The gross margin is 21.1% against a median of 20.2%. Margin stability is 0.56. ROIC is 10.2% against a WACC of 8.2%, and the ROIC minus WACC value of 1.9% is labelled neutral. The five-year median ROIC is 6.0%. On the DuPont split (2025 year-end), the net margin of 7.6%, asset turnover of 0.52 and equity multiplier of 2.62 produce a return on equity of 12.3% on a TTM basis, so leverage contributes to the return.

Growth

Growth is green. Revenue has compounded at 9.7% over three years, 9.4% over five and 4.7% over ten. Revenue rose in 9 of the last 10 years. EPS compounded at 12.4% over three years, but its ten-year CAGR is -5.4%. Free cash flow per share compounded at 22.9% over three years and 35.4% over five, but only 1.4% over ten. The consensus EPS growth estimate for next year is 5.1%, which is neutral.

Valuation

Valuation is red, because the verdict is overvalued at a margin of safety of -27.2%. The P/E of 31.1 is 11.0% above its historical median, and EV to EBITDA of 17.5 is 8.6% above. Price to free cash flow of 29.0 is 3.3% below its median. Price to sales of 2.76 is 52.5% above its median and price to book of 3.83 is 93.4% above. The DCF gives 108.88 USD per share, using a discount rate of 8.87%, first-stage growth of 5.1% and terminal growth of 2.5%. The fair value band is built on fixed assumptions, including a 5% equity risk premium and capped growth. It is an order of magnitude, not a price target. The reverse DCF implies 12.2% growth, against 9.4% five-year revenue growth. Dividend yield is 1.4%, and the dividend uses 41.6% of free cash flow.

Risks

The weak numbers each carry a specific risk. A current ratio of 1.05 and a quick ratio of 0.38 leave little liquidity cushion if receivables or inventory slow. ROIC of 10.2% against a WACC of 8.2% leaves little room if returns on new programmes fall. A price to book of 3.83 against a median of 1.98 means the share price depends on continued high returns. The DCF of 108.88 USD sits well below the price, so the case depends on growth the model does not fully capture. Some values are not available, including the debt maturity schedule and revenue by segment. This analysis therefore cannot assess refinancing timing or the earnings contribution of each division.