Summary
Raytheon's stock is trading at a 15% discount to the 52-week high.
The valuation is attractive on a forward earnings growth basis.
Domestic and international sales will drive strong sales and earnings growth going forward.
Raytheon's (RTN) recent drop from the 52-week high of nearly $230 down to the current price of $196 has the stock selling at a 15% discount. The valuation wasn't excessive before the drop, so the current price provides a better entry point. I expect strong domestic and international sales of Raytheon's defense systems to drive backlog growth. This will lead to above-average sales and earnings growth for Raytheon, leading the stock to outperform over the long-term.
Valuation Improvement
Raytheon wasn't valued excessively when the stock was at the 52-week high back in April. At that time, the forward PE was in the lower 20s. That is a fair valuation for companies with above-average double-digit earnings growth, which Raytheon has.
