Textron Inc (TXT)

Conclusion

Textron Inc is a US industrial company with aircraft, defense, industrial and finance businesses, including Textron Aviation, the Bell helicopter business and Textron Systems. On 2026-11-09 the share price was 85.41 USD, giving a market capitalisation of 14.47 billion USD.

The verdict is fair. Today's multiples sit below their own ten-year medians: P/E of 14.9 against a median of 18.8, EV/EBITDA of 9.8 against 11.9, and P/B of 1.8 against 2.3. The fair value band runs from 75.16 to 112.74 USD, with a midpoint of 93.95 USD and a margin of safety of 10.0% at the current price. The DCF gives 82.54 USD per share at a discount rate of 9.3%, and the fair value from historical multiples is 105.35 USD. The reverse DCF implies growth of 4.8% a year, against a revenue CAGR of 4.9% and a free cash flow per share CAGR of 10.5%, both over five years.

The strongest numbers are five-year free cash flow conversion of 95.3%, a Piotroski score of 7 out of 9, and net debt to EBITDA of 1.12. The weakest are ROIC minus WACC of 2.0%, a three-year free cash flow per share CAGR of -4.8%, and an Altman Z-score of 2.81 in the grey zone. A sustained fall in returns or cash flow per share would weaken the case.

Financial health

Financial strength is green, supported by a current ratio of 5.69, a quick ratio of 1.95, net debt to EBITDA of 1.12 and interest coverage of 12.3, all assessed as good. Debt to equity is 0.43. The Altman Z-score is 2.81, in the grey zone; the Altman model was designed for manufacturers, and Textron is only partly one. Insolvency risk: low, about 0.5% by the estimate of the Ohlson model over one to two years. The company's debt has also fallen over five years, with a debt versus revenue growth value of -6.8%. The balance sheet gives no obvious cause for concern at these levels.

Earnings quality

Earnings quality is green. Free cash flow conversion is 83.3% on a trailing twelve-month basis and 95.3% over five years, and the accrual ratio is -2.0%, which indicates that reported earnings are backed by cash. Free cash flow after stock-based compensation is 810 million USD, but the stock-based compensation to revenue figure is not available because the company does not report it in the data used here. The share count fell at a compound rate of 4.5% over five years, which points to buybacks. The Piotroski score is 7 out of 9. No Beneish M-score reading is available. The company beat earnings estimates in all 8 of the last quarters, with an average surprise of 9.4%. Current-year estimates rose 2.7% over 90 days, while next-year estimates fell 0.2% over 90 days, with 3 downward revisions against 2 upward in the last 30 days.

Profitability

Profitability is yellow. The gross margin of 16.4% is below its ten-year median of 17.4%, the operating margin of 8.1% is above its median of 7.5%, and the net margin of 6.3% is above its median of 6.1%. Operating margin stability is 10.4%. ROIC is 10.2% against a WACC of 8.3%, a ROIC minus WACC value of 2.0%, which is neutral: the business earns a modest return above its cost of capital. Return on equity is 12.0%. The DuPont split shows a net margin of 6.2%, an asset turnover of 0.82 and an equity multiplier of 2.30, so leverage contributes a noticeable share of the return on equity.

Growth

Growth is green. Revenue compounded at 4.8% over three years, 4.9% over five years and 1.0% over ten years, and revenue grew in 7 of the last 10 comparable years. Earnings per share compounded at 8.5% over three years, 30.2% over five years and 7.4% over ten years. Free cash flow per share fell at a compound rate of 4.8% over three years, while it rose 10.5% over five years and 5.8% over ten years. The five-year earnings figure reflects a recovery from a weak base, so the three-year and ten-year figures give a steadier picture.

Valuation

Valuation is yellow. The P/E of 14.9 is 21.0% below its ten-year median of 18.8, EV/EBITDA of 9.8 is 17.2% below 11.9, P/FCF of 17.9 is 11.3% below 20.1, P/S of 0.94 is 13.9% below 1.09, and P/B of 1.8 is 22.2% below 2.3. The DCF gives 82.54 USD per share at a discount rate of 9.3%, with 54.1% of the value in the terminal value. The fair value band is 75.16 to 112.74 USD, with a midpoint of 93.95 USD and a margin of safety of 10.0%. This is an order-of-magnitude estimate built on fixed assumptions, including a 5% equity risk premium and capped growth, and it is not a price target. The reverse DCF implies growth of 4.8%, in line with the revenue CAGR of 4.9% over five years. The dividend yield is 0.1% and the payout on free cash flow is 2.1%.

Risks

Several weak numbers could hurt the company. A ROIC of 10.2% against a WACC of 8.3% leaves little margin for error; a fall in returns would weaken the case for the fair value band. The three-year decline of 4.8% in free cash flow per share shows that cash generation has not been steady, and a continuation would undermine the DCF. Negative next-year estimate revisions, with 3 downward against 2 upward, could signal weaker near-term earnings. The Altman Z-score of 2.81 in the grey zone adds some uncertainty about financial stress, although the Ohlson estimate points to low insolvency risk. The stock-based compensation figure and the Beneish M-score are not available. This analysis has no debt maturity schedule and no revenue by segment, so it cannot test how the Bell, Textron Aviation or Industrial businesses contribute to the numbers above.