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 Transdigm Group, in a nutshell, manufactures critical components of airplanes, such as ignition systems and controls, for the aerospace industry. With that said, I just read an interesting piece by fellow Fool Alex Moore a few days ago when I was looking at Transdigm as a potential stock investment that raised a few alarms:


 Seeing as how Transdigm's EPS Due Date is tomorrow, I'm going to hold off on buying this stock for now. However, a look at its financial balance reveals a largely stellar company that is marred by a few disturbing factors. Approaching Transdigm from a negative perspective, we can see that it has a 299% Debt/Equity Ratio, $3.2 Billion in goodwill and intangibles, a 73% intangible assets ratio, as well as a downgraded estimate earnings. 


One can just as easily approach Transdigm from the positive aspect. The EPS % Change of the last quarter compared with the same quarter of last year's EPS is an impressive 38%, and the average EPS growth of the last three quarters is a solid 29%. The current quarter's estimated EPS growth compared with last years is, although downgraded, still a progressive 21%. And, Transdigm has delivered earnings surprises in the past. In fact, last quarter it beat analysts' expectations by 9%. Maybe Transdigm, in downgrading its earnings estimates, was setting an artificially lower bar over which they can jump over more easily.


The estimated annual earnings growth of Transdigm this year is 28.65%, a huge jump compared with its 11% 3 Year EPS Growth Rate. More interestingly, Transdigm's % change of last quarter compared to the same quarter of last year was a huge 52%. Its annual Return on Equity (ROE) is 25.1% and it has had 4 consecutive years of EPS growth, a trend that is likely to continue into this year. 


There is no doubt Transdigm Group, Inc is growing significantly, and I largely expect it to beat EPS estimates tomorrow. However, I caution against using Transdigm for a LONG TERM play, as sooner or later (most likely later), the 299% Debt/Equity Ratio and other aforementioned negative factors will come back to haunt it. Rather, buy it for the short term and ride its wave of prosperous growth, which most likely won't be too adversely affected by the large inkblots but rather by significant worldwide demand. In fact, just today Wedbush analysts predicted significant growth in China and Asia will prop up commercial aerospace demand: 


So what do you guys think of Transdigm Group, Inc? 

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