General Dynamics Corporation (NYSE ) is a company I recommend to retail investors nearly a decade ago. Today, I believe the stock has great potential and am bullish.

GD has been awarded the Blue Ribbon Company status

GD includes five business areas: Aerospace, Marine Systems, Combat Systems, Technologies, Gulfstream Business Jets, as well as Combat Systems, Combat Systems, Technologies, Technologies, Aerospace, Marine Systems, Combat Systems, Technologies, GD. Fortune ranks GD at 13 on its Blue Ribbon List of the “best of the Best” companies. Investors have been rewarded with 24 consecutive annual increases to their dividend by GD. It is an acceptable 2.4%.  

At the close of quarter 2, GD held $130 billion in all backorder component. This stock is up 38.8% in the past twelve months. TipRanks shows the GD stock chart.

Six analysts average General Dynamics share price targets of $216.17, which implies a potential upside of 9.08%. This is an optimistic estimate. The stock is valued at $240 per share with all the back orders and any pending military expenditures on weapon systems (especially for the Navy, Space Force and Gulfstream),  

Q2 ’21 net earnings were up about 18% year over year and EPS +19.7%. Company has $4.75 Billion in cash and a strong free cash flow. Gulfstream’s order volume is booming as the economy recovers after the pandemic.

Shipbuilding is getting more Defense money

GD holds an “Outperform” TipRanks Smart Score of 9, with analysts rating GD a Moderate Buy and TipRanks Investors neutral. The stock’s future looks brighter, according to me. Activity in hedge funds is increasing. The GD technicals remain in good territory. As the share price rose, insider buying has been strong in the last year. This is especially true for March, June and September. The short-term interest rate at one percent reflects this positive sentiment.

Additionally, the Pentagon budget will get an estimated four percent boost to counter increases in China’s defense spending. Moreover, foreign policy defense experts are calling for significant upgrades to the U.S. Navy, as it is the primary conventional deterrence to China’s recent flexing of military muscle.

Also of note, America’s supply chain problems exist for the U.S. Army too. Everything is delivered by the Navy, including food, fuel and munitions. Ships are also needed to maintain open sea lanes. Fortunately for GD, the company is one of the primary shipbuilders and retrofitters for the Navy at GD’s Bath Iron Works, Electric Boat, and NASSCO divisions.

The U.S. Department of Defense, which is expected to bring in a record-breaking amount of revenue next year, could also be a source of income. The U.S. Department of Defense (DOD) has specifically requested $122 million for technology development in hypersonics, microelectronics, and artificial intelligence (AI). GD is expected to receive a substantial share of this money.

Downsides to GD Stock

First, GD’s net debt of $11.4 million is a risk. However, this is $900 million less than it was last year. The equity is $15.3 billion, and the ratio of debt to equity has been increasing for five years. EBIT is used to pay interest. Cash flow pays the debt. Market capitalization is greater than $55 Billion. The company has the ability to raise funds if it needs, such as to finance new contracts and pay off debt.

The supply chain interruptions are another risk for GD. In the four-year period, GD undertook an extensive supply chain review. GD plans to build 39 submarines over the next twenty years. Built submarines were once purchased from over 17,000 suppliers, but that number is now only 5,000. GD is trying to control quality.

Gulfstream will introduce new designs of jets to the commercial sector. A customer received the 50th G600 model from this division. Gulfstream projects that the market will experience a 7.4% compound annual growth rate (CAGR), from 2025. While it may take some time before Gulfstream can reach pre-pandemic levels, the market is looking good.

GD seems worth the price

GD is given a Moderate Buy consensus rating of six Wall Street analysts. This includes four Buys, and two Holds. I’m optimistic about GD because its combat system, military, and aerospace revenue streams have increased. Technology revenue generated by encryption products and services has also increased. GD’s upside may be even higher as more money will likely go into shipbuilding after U.S. lawmakers reduce the number of soldiers on the ground in Afghanistan and Iraq.

Disclosure: Harold Goldmeier was not a shareholder in any securities discussed in this article.

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