Here is Why RTX (RTX) is a Bad Investment at Today’s Price

RTX Corporation (NYSE:RTX) closed at $184.68 on October 2, up 9.41% over twelve months.

Almost everything about the business is going well. Defense budgets are rising, the order book is filling, and the engines and missiles RTX builds are in demand across two continents. None of that is in dispute here. What is in dispute is the price being asked for it.

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The Business is Working:

Revenue grew 14.50% in the most recent quarter, and earnings grew 29.10%, on a revenue base of $93.5 billion. Growth at that rate from a company this large is not common.

The demand behind it is unusually visible. Defense orders are placed years ahead and funded by governments, which makes the revenue easier to forecast than almost anything in industry.

RTX produced $9.88 billion of levered free cash flow over the past twelve months. That comfortably funds the $2.92 dividend, which takes 48.77% of earnings.

The company also sits on both sides of a useful divide, selling commercial aircraft engines alongside defense systems, so a slowdown in one does not usually arrive with a slowdown in the other.

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The Price Assumes All of That and More:

Now the part that does not work. RTX trades at 33.62 times trailing earnings of $5.69 a share. For a business growing in the mid-teens, that is a multiple normally reserved for something growing far faster.

The PEG ratio of 2.21 makes the same point more precisely. It compares the multiple against the expected growth rate, and anything above two means the price has run ahead of what the company is likely to deliver.

The margins explain why this matters. RTX keeps only 8.28% of revenue as net profit and 12.70% as operating profit.

That thinness is structural rather than a stumble. Defense contracts are negotiated against audited costs, so the customer knows the supplier’s margin and prices accordingly.

A contractor cannot widen a margin the way a software company can. It can only sell more at roughly the same slim rate, which caps how much a rising order book is worth.

Return on equity is 12.27%, and the company carries $38.86 billion of debt against $8.3 billion of cash. RTX ranks third among the defense stocks in the S&P 500. Two companies rank above it, and you can see both here.

The Valuation Case:

RTX closed at $184.68 on October 2 and is worth $257.41 billion. Sustainability is the strongest part of the story. Government orders funded years in advance are about as durable as revenue gets, and the backlog is not in question.

The price is where it breaks down. The forward multiple of 24.57 times still assumes significant earnings growth, and enterprise value to EBITDA of 17.90 times is high for a manufacturer with single-digit net margins. Price-to-book of 3.88 compounds it. Investors are paying nearly four times accounting value for assets that produce a 12.27% return.

The dividend does not bridge the gap either. A 1.58% yield is below what a government bond pays today, so an investor is not being compensated to wait. The ten best-performing dividend stocks of the year so far include an industrial, a refiner, and a chip equipment maker, and no defense contractor at all. You can find them here.

Conclusion:

RTX is a good business. The order book is visible years ahead, revenue grew 14.50% last quarter, and free cash flow covers the dividend twice over. However, 33.62 times trailing earnings and a PEG ratio of 2.21 are prices paid for growth that structurally capped margins cannot deliver. The number to watch is the net margin, because the whole case for this multiple rests on it widening.

Market Sentiment:

RTX Corporation was held by 92 hedge funds with a combined stake value of about $10.37 billion at the end of Q2 2026 in the Insider Monkey database. This is down from 95 hedge fund holders with a cumulative investment value of around $9.42 billion in the previous quarter.

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This article is originally published at Insider Monkey.