Executive Summary of RTX Corp (RTX) RTX Corp is an aerospace and defense conglomerate that designs and manufactures aircraft engines, avionics and defense systems and presents as a cash-generative, moderately leveraged industrial business. The company shows clear top‑line and earnings momentum: revenue per share has grown at a 9.38% CAGR over five years and rose about 9.74% year‑over‑year, while E
RTX Corp is an aerospace and defense conglomerate that designs and manufactures aircraft engines, avionics and defense systems and presents as a cash-generative, moderately leveraged industrial business.
The company shows clear top‑line and earnings momentum: revenue per share has grown at a 9.38% CAGR over five years and rose about 9.74% year‑over‑year, while EPS has compounded at roughly 9.01% over three years, supporting steady earnings expansion (see EPS Diluted & Revenue per Share and Revenue & EPS Growth).
Operational efficiency is a second strength: gross margin is 37.0% and operating margin is 28.6%, indicating strong control of cost of goods sold and operating expenses (see Profit Margin Trends).
Cash generation reinforces quality of earnings — trailing‑twelve‑month operating cash flow is $10.57B versus net income of $6.73B, with operating cash flow exceeding net income by a factor of about 1.57 and a cash conversion ratio near 1.40 — consistent conversion of profit into cash (see Earnings Quality Analysis and Revenue & Net Income).
Leverage appears conservative on balance sheet metrics: debt‑to‑equity is 0.4975 and reported net debt metrics are effectively low in relation to owner earnings (see Strategic Capital Allocation).
The gap between operating and net profitability and evolving capital deployment are notable. Net profit margin is only 7.6% while operating margin is 28.6%, a wide spread that reflects sizeable non‑operating charges, taxes or other below‑the‑line items that compress reported net income (see Profit Margin Trends).
The company’s financing cash flows were strongly negative at −$7.49B in the trailing twelve months while investing cash flow was −$1.26B and operating cash flow $10.57B, signaling substantial cash returned or deployed via financing activity that warrants monitoring relative to reinvestment needs (see Strategic Capital Allocation).
Valuation multiples have also moved higher: the most recent P/E stands at 37.0x after a multi‑quarter rise from the low‑30s and well above earlier decade ranges near 17–23x, which elevates sensitivity to future earnings (see Price-to-Earnings (PE) Ratio Trend).
The foundation of business quality and long-term value creation
Why Growth Matters
Consistent revenue and earnings growth are the lifeblood of successful long-term investments. Companies that can grow their top line (revenue) and bottom line (net income) over many years demonstrate they have products or services customers value and are willing to pay for repeatedly.
Revenue Growth shows whether the company is expanding its market reach, gaining market share, or successfully launching new products.Net Income Growth demonstrates the company can convert that revenue into actual profits while managing costs effectively.
Look for steady, sustainable growth rather than erratic spikes. The best businesses compound earnings year after year, creating tremendous value for shareholders over time. Companies that can grow earnings faster than revenue are improving their profitability—a sign of operational excellence and competitive strength.
Year-over-year growth rates for revenue and earnings per share
Reading the Growth Rate Chart
This chart converts the absolute per-share figures into year-over-year percentage changes, making it easy to see whether growth is accelerating, decelerating, or reverting to trend — regardless of the company's absolute size.
Revenue per Share Growth (1-year, split-adjusted) measures how quickly the top line is expanding on a per-share basis. Sustained positive growth signals that the company continues to win customers and grow its addressable market.EPS Diluted Growth (1-year, split-adjusted) measures how quickly earnings are compounding for each shareholder. When EPS growth consistently outpaces revenue growth, operating leverage and margin expansion are at work.
Look for consistency, not just magnitude. A company that reliably grows EPS 10–15% per year is far more valuable than one that alternates between 50% spikes and deep contractions. Negative EPS growth during a period of positive revenue growth is a red flag — costs are rising faster than sales. Quarters where both lines converge near zero or go negative deserve close scrutiny.
How revenue converts to net income for the most recent annual period
Period Information
Report Type: Annual (10-K)
Period: Jan 2025 to Dec 2025
Analyzing long-term margin stability and competitive positioning
RTX Corp’s most recent quarterly net profit margin has risen to 7.6 %, up from 5.6 % in the first quarter of 2024 and 4.9 % earlier that year, indicating a rebound after a period of lower profitability.
The company’s gross margin as of December 31 2023 stands at 37.0 %, a decline from roughly 48 % in 2018 but still above many peers in the aerospace and defense sector.
Operating margins for the same period are reported at 28.6 %, reflecting efficient control of operating expenses relative to revenue.
Note: The net profit margin fluctuated around 5–8 % over the past few years, with a dip below zero during early 2020 due to pandemic disruptions and has since recovered steadily.
Understanding Profit Margins
Between Jan 2025 and Dec 2025, Rtx Corp converts every dollar of revenue through the following stages:
Sustainable competitive advantages reveal themselves through consistently superior profit margins over extended periods. Companies with durable economic moats maintain pricing power and operational efficiency that competitors struggle to match.
A sign of durable competitive advantage is earning sustained higher margins than competitors.Look for margins that remain stable or improve over time, especially during economic downturns. Declining margins may signal increasing competition, pricing pressure, or deteriorating business fundamentals.
Comparing reported earnings to actual cash generation
RTX Corp’s trailing‑twelve‑month operating cash flow has outpaced its net income for the most recent three quarters. In FY 2025, operating cash flow rose from $7.96 B in Q3 to $10.57 B in Q4, while net income grew modestly from $6.59 B to $6.73 B over the same period. The gap between the two metrics widened further, with operating cash flow exceeding net income by roughly $4 B in Q4, indicating robust working‑capital management and conservative accounting practices.
Looking back at FY 2024, both figures were lower: operating cash flow was $7.16 B and net income $4.77 B in Q4, showing a similar pattern of cash generation surpassing earnings. Earlier quarters of 2025 displayed a gradual tightening of the gap, with operating cash flow moving from $5.85 B to $8.12 B while net income fluctuated between $4.60 B and $6.15 B. Overall, the trend suggests that RTX Corp consistently produces more cash from operations than it reports as profit.
The most recent trailing‑twelve‑month operating cash flow was $10.57 B and the trailing‑twelve‑month net income was $6.73 B.
The Earnings vs. Cash Flow Gap
Reported earnings (Net Income) doesn't always reflect actual cash generation. Companies use accrual accounting, which recognizes revenue when earned and expenses when incurred—not when cash actually changes hands. This creates timing differences and opportunities for accounting discretion that can mask underlying business health.
Net Income (the "earnings" number) can be influenced by non-cash items like depreciation, stock-based compensation, and changes in accounting estimates.Operating Cash Flow, however, shows the actual cash the business generates from its core operations—a harder number to manipulate.
What to Look For
Key Insight: Companies with durable competitive advantages typically show operating cash flow that meets or exceeds net income over time, demonstrating they convert accounting profits into actual cash that can be returned to shareholders or reinvested in the business.
Measuring management's efficiency at generating profits from shareholder capital
The return on equity for RTX Corp has shown a positive trend in the most recent fiscal year, increasing from 7.5% at the end of March 2025 to the current level of 10.3% as of December 31 2025. The quarter-over-quarter improvements—from 9.8% in June, 10.2% in September, to the current 10.3%--demonstrate growing profitability relative to shareholder equity.
In the previous year, ROE remained steady between 7.7% and 7.9%, indicating a modest base that has now begun to expand. A notable inflection point occurred after an unusually low reading of 3.8% in June 2024, followed by a rebound to 5.8% in September 2024. This swing suggests a period of operational adjustment or capital restructuring before the company returned to healthier levels.
The recent steady climb aligns with broader industry trends toward higher efficiency and better asset utilization.
The most recent quarterly return on equity for RTX Corp is 10.3%.
The Gold Standard of Profitability
Return on Equity (ROE) is a powerful measure of how effectively a company's management is using the money shareholders have invested. Calculated by dividing Net Income by Shareholders' Equity, it reveals how much profit is generated for every dollar of equity capital.
A consistently high ROE (typically above 15-20%) is often the signature of a "quality" business with a durable competitive advantage. It indicates that the company can generate high returns on its own capital, which it can then reinvest at these high rates to compound value over time.
What to Look For:
How the company generates and deploys its cash
RTX Corp has generated robust operating cash in the trailing twelve months, climbing from $8.12 B in early 2025 to a peak of $10.57 B as of year‑end 2025.
Latest Operating Cash Flow: $10.57 B
The investing cash flow is $-1.26 B; and the financing cash flow is $-7.49 B.
Understanding Company Strategy
Capital allocation refers to how management decides to spend and invest the company's cash. Analyzing the three primary categories of cash flow reveals a company's true operational strategy:
What to look for: Is the company bootstrapping (funding growth solely from operating cash)? Are they borrowing to fund aggressive expansion or dividends? Or are they capital raising by issuing new shares, potentially diluting your ownership? A healthy, mature company typically generates strong operating cash, moderately invests in growth, and returns the surplus to shareholders through financing activities.
Net assets attributable to each share — the accounting floor of intrinsic value
Why Book Value per Share Matters
Book value per share is the net worth of the company — total assets minus total liabilities — divided by shares outstanding (split-adjusted). It represents the theoretical liquidation value per share if every asset were sold and every liability repaid at balance-sheet carrying values. It is the accounting foundation upon which much of equity valuation is built.
A steadily rising book value per share is one of the most reliable signals of compounding wealth creation. It means the company is retaining earnings and building net worth faster than it is returning capital or eroding it. Warren Buffett famously tracked Berkshire Hathaway's book value per share for decades as his primary measure of intrinsic value growth.
Context is essential. Asset-heavy businesses (banks, manufacturers, utilities) should be judged by book value more directly than asset-light businesses (software, consumer brands), where intangible assets like intellectual property and customer loyalty may far exceed their balance-sheet carrying values. A company trading at a large premium to book value is not necessarily overvalued — it may simply possess competitive advantages that accounting rules do not capture. Conversely, a declining book value per share — especially over multiple years — is a serious warning sign of capital destruction.
How much of the company is financed by debt versus shareholders' equity
Reading the Debt-to-Equity Ratio
The debt-to-equity (D/E) ratio compares total financial debt to shareholders' equity. A ratio of 1.0 means the company has borrowed one dollar for every dollar of equity; a ratio of 2.0 means it has borrowed twice as much as it owns. Financial leverage amplifies both returns and risk: in good times, debt turbocharges equity returns; in bad times, it accelerates losses and can threaten solvency.
Trends matter more than a single number. A rising D/E ratio can mean the company is taking on debt to fund growth — potentially value-creating if returns exceed the cost of capital. But it can also mean equity is being eroded through losses or that the business is borrowing simply to sustain operations. A falling D/E ratio generally reflects strengthening financial health: earnings are being retained, debt maturities are being paid down, or both.
Industry norms vary enormously. Capital-intensive sectors (utilities, real estate, financials) routinely carry high D/E ratios that would be alarming in, say, a technology company. Always compare against sector peers. As a rough rule of thumb, a D/E above 2× in a cyclical business warrants careful scrutiny of interest coverage and refinancing risk.
Short-term liquidity — can the company cover its near-term obligations?
Liquidity: Can the Business Pay Its Bills?
The current ratio is calculated as current assets divided by current liabilities. A ratio of 1.5 means the company has $1.50 of short-term assets — cash, receivables, inventory — for every $1.00 of obligations due within the next twelve months. It is the most direct measure of near-term financial resilience: can the business meet its obligations without needing to raise new capital or sell long-term assets at a discount?
A ratio above 1.0 is generally healthy, meaning current assets exceed current liabilities. A ratio consistently above 2.0 may indicate the company is holding excess cash or inventory that could be deployed more productively. A ratio below 1.0 is a warning sign — the company is relying on future cash generation or external financing to cover its near-term obligations, which is manageable in normal conditions but dangerous during a downturn.
Trends and context matter.A declining current ratio isn't always alarming — highly efficient businesses (e.g., large retailers with reliable daily cash flows) often run leaner balance sheets intentionally. Conversely, a rapidly rising current ratio can signal slowing sales causing inventory to build, or customers taking longer to pay. Always compare the trend against industry peers and cross-reference with the cash flow statement to assess whether the business is genuinely liquid or just holding non-cash current assets.
How much the market is paying for each dollar of company earnings
RTX Corp’s price‑to‑earnings ratio has trended upward over the last several quarters, rising from 32.9x at the end of 2024 to 34.4x in Q3 2025 and reaching 37.0x by year‑end 2025.
This recent acceleration follows a period of volatility: the ratio peaked at 59.7x in mid‑2024 before falling back into the low‑30s range. The sharp drop from 59.7x to 34.8x between Q2 2024 and Q3 2024 suggests that earnings growth may have outpaced price appreciation during that interval, tempering the valuation multiple.
Earlier in the decade the P/E ratio hovered around 17–23x, with occasional spikes such as the 53.0x level in mid‑2021 and a negative value in early 2021 when the company posted losses. Since then, RTX Corp has maintained a consistently higher range (≈30–37x), reflecting stronger earnings performance relative to its peer group. The most recent P/E ratio was 37.0x.
What Is the PE Ratio?
The Price-to-Earnings (PE) ratio is one of the most widely used valuation metrics in investing. It divides the current stock price by the company's earnings per share (EPS), revealing how much investors are willing to pay for each dollar of earnings. A high PE can signal that the market expects strong future growth, while a low PE may suggest undervaluation—or reflect genuine concerns about the company's prospects.
Context matters:PE ratios vary significantly across industries. High-growth technology companies routinely trade at PE ratios above 30x or 40x, while mature, low-growth sectors like utilities or financials often trade closer to 10–15x. Always compare a company's PE to its own history and its industry peers, not just an absolute number.
What to Look For:
Key Insight:The PE ratio is a snapshot of market sentiment and expectations. Tracking it over time alongside earnings trends reveals whether the market's valuation has expanded or contracted—and whether that change is justified by fundamentals.