Huntington Ingalls Industries (NYSE:HII) is one of the smaller major defense contractors with only a $12B market cap compared to industry behemoth Lockheed Martin (NYSE:LMT) with an almost $100B market cap. HII is also a pure-play shipbuilding defense contractor with the vast majority (87%) of its coming from the US Navy. Of the major defense contractors, HII is one of the cheapest trading at a forward P/E of around 15. But the company’s cyclical nature can make simple valuation metrics like the P/E ratio look distorted.
Monopoly Market Position
The company has a very enviable position with a near monopoly in some areas of shipbuilding and an oligopoly in others. For the construction and refueling of nuclear aircraft carriers the company is the prime contractor. From their 10-K:
