Over the last six months, Textron’s shares have sunk to $79.25, producing a disappointing 19.6% loss - a stark contrast to the S&P 500’s 12% gain. This might have investors contemplating their next move.
Is there a buying opportunity in Textron, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Textron Not Exciting?
Despite the more favorable entry price, we’re sitting this one out for now. Here are three reasons we avoid TXT, plus one stock we’d rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Textron’s 4.2% annualized revenue growth over the last five years was sluggish. This was below our standard for the industrials sector.
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Textron’s revenue to rise by 3.8%, close to its 4.2% annualized growth for the past five years. This projection is underwhelming and implies its newer products and services will not lead to better top-line performance yet.
3. Free Cash Flow Margin Dropping
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Textron’s margin dropped by 3.6 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. Textron’s free cash flow margin for the trailing 12 months was 4.9%.
Final Judgment
Textron’s business quality ultimately falls short of our standards. After the recent drawdown, the stock trades at 12× forward P/E (or $79.25 per share). This valuation multiple is fair, but we don’t have much faith in the company. We’re fairly confident there are better stocks to buy right now. We’d recommend looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
Stocks We Would Buy Instead of Textron
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.