Citron Research Negative on TransDigm Group (TDG) amid Trump Era; Calls Valeant of Aerospace

(Updated - January 20, 2017 10:01 AM EST)

Citron Research issued a negative report on TransDigm Group (NYSE: TDG) Friday, saying the stock could become the Valeant of the Aerospace industry.

Citron explains TransDigm’s model in aerospace is similar to Valeant's model in pharma: "TransDigm acquires airplane parts companies (over 50 in total), fires employees, and egregiously raises prices. This business model has made them a dominant supplier of airplane parts to the aerospace industry while burdening its balance sheet with sky-high debt load..."

They think this could all end under Trump. TransDigm’s single largest customer is the Department of Defense, followed by Boeing and Airbus.

The firm said if the stock were to operate with the same EBIDTA margins as HEICO, their next closest competitor on EBITDA margin, which is still double that of the rest of their peer group, its EPS falls 85% and the stock is $40 a share.

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