Is Lockheed Martin (LMT) Attractively Priced After Recent Defense Contract Momentum
- If you are wondering whether Lockheed Martin's current share price lines up with its underlying value, you are not alone. That is exactly what this article is here to unpack.
- Over shorter periods, the stock has shown mixed signals, with a 2.7% return over the last 7 days, 6.8% over 30 days, around 0.0% year to date, 9.1% over 1 year, 16.4% over 3 years, and 65.0% over 5 years.
- Recent headlines have kept Lockheed Martin in focus, including ongoing contract awards and defense spending discussions in key markets. These often influence how investors think about long term demand for its products. These developments help frame why the stock's recent returns might look different across short and long timeframes.
- On our valuation checklist, Lockheed Martin scores 5 out of 6 for being undervalued, giving it a value score of 5. Next we will look at how different valuation methods arrive at that view and why there may be an even better way to judge value by the end of this article.
Find out why Lockheed Martin's 9.1% return over the last year is lagging behind its peers.
Approach 1: Lockheed Martin Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model estimates what a company could be worth by projecting its future cash flows and then discounting those back into today’s dollars.
For Lockheed Martin, the model uses a 2 Stage Free Cash Flow to Equity framework built on its last twelve months free cash flow of about $4.5b. Analyst inputs and Simply Wall St extrapolations project free cash flow out over the next decade, including figures such as $6.2b for 2026 and $7.5b for 2029, all in $ and then discounted back to today using the model’s required return assumptions.
Pulling those discounted projections together, the DCF model arrives at an estimated intrinsic value of $646.01 per share. Compared with the current market price, this indicates that the stock is trading at a 23.1% discount to that DCF estimate, which suggests that Lockheed Martin may be undervalued on this cash flow view.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Lockheed Martin is undervalued by 23.1%. Track this in your watchlist or portfolio, or discover 884 more undervalued stocks based on cash flows.
Approach 2: Lockheed Martin Price vs Earnings
For profitable companies like Lockheed Martin, the P/E ratio is a straightforward way to link what you pay for the stock to the earnings it currently generates. It is popular because it helps you see how many dollars of price you are paying for each dollar of earnings.
What counts as a “normal” P/E depends on what investors expect for future growth and how much risk they see in the business. Higher expected growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk usually point to a lower multiple.
Lockheed Martin is trading on a P/E of 27.37x. That is below the Aerospace & Defense industry average P/E of 38.90x and also below the peer group average of 35.74x. Simply Wall St’s Fair Ratio for Lockheed Martin is 34.84x, which is the P/E level suggested by its own model that blends factors such as earnings growth profile, industry, profit margins, market cap and company specific risks.
The Fair Ratio is more tailored than a simple peer or industry comparison because it adjusts for these company characteristics rather than assuming all firms deserve the same multiple. With the current P/E of 27.37x sitting below the Fair Ratio of 34.84x, the stock appears undervalued on this earnings based view.
Result: UNDERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1443 companies where insiders are betting big on explosive growth.
Upgrade Your Decision Making: Choose your Lockheed Martin Narrative
Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St’s Community page you can use Narratives, where you and other investors connect a clear story about Lockheed Martin to specific forecasts for revenue, earnings and margins. You can then translate that into a fair value, compare it to today’s price to decide whether the stock looks attractive or stretched, and see that view update automatically when fresh news or earnings arrive. For example, one investor might build a Narrative around the higher end analyst fair value of about US$528 per share and the bullish target of US$544. Another might anchor to the lower target of US$398 and a more cautious outlook. This gives you a simple way to see how different assumptions create different fair values and to choose which story you agree with.
Do you think there's more to the story for Lockheed Martin? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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