• If you are wondering whether L3Harris Technologies at around US$302 a share looks expensive or attractive, the next step is to line that price up against what the business might reasonably be worth.
• The stock has seen a 6.0% decline over the last 7 days and a 15.8% decline over the last 30 days, even though the 1 year return sits at 41.0% and the 3 year return at 70.1%.
• Recent headlines have focused on L3Harris Technologies as a key player in aerospace and defense programs and contract activity, which often shapes how investors think about the resilience of its revenue streams. This backdrop helps explain why the stock can see periods of strong interest followed by pullbacks as expectations adjust.
• Simply Wall St currently assigns L3Harris Technologies a valuation score of 6/6, and the sections that follow will walk through the main valuation approaches used to reach that result, before circling back to an even more useful way to think about what the stock might be worth.

Approach 1: L3Harris Technologies Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes the cash L3Harris Technologies is expected to generate in the future and discounts those amounts back to what they might be worth in today’s dollars.

L3Harris Technologies most recent Free Cash Flow is about $2.59b. Analysts and internal estimates project Free Cash Flow to reach about $4.02b by 2030, with a detailed 2 Stage Free Cash Flow to Equity model used to bridge the years in between. Simply Wall St uses analyst estimates where available and then extends those cash flows beyond the formal forecast period using its own extrapolations.

Adding up all those projected cash flows and discounting them back to today gives an estimated intrinsic value of about $418.93 per share for L3Harris Technologies. Against a recent share price of roughly $302, this suggests the stock is about 27.9% below that DCF estimate, based on this model alone.

Result: UNDERVALUED (per this DCF model)

Our Discounted Cash Flow (DCF) analysis suggests L3Harris Technologies is undervalued by 27.9%. Track this in your watchlist or portfolio, or discover 45 more high quality undervalued stocks.

Approach 2: L3Harris Technologies Price vs Earnings

For profitable companies, the P/E ratio is a useful shorthand because it links what you pay for the stock to the earnings the business is currently generating. Investors usually accept a higher P/E when they expect stronger earnings growth or view the business as lower risk, and a lower P/E when growth expectations are more modest or risks are higher.

L3Harris Technologies currently trades on a P/E of 32.50x. That sits below the Aerospace & Defense industry average of about 34.93x and the peer group average of 36.05x, which suggests the stock is priced a bit more conservatively than many comparable companies on this metric.

Simply Wall St’s Fair Ratio for L3Harris Technologies is 33.29x. This proprietary metric estimates what the P/E might be given factors such as the company’s earnings growth profile, its industry, profit margins, market cap and key risks. Because it blends these fundamentals, the Fair Ratio can provide a more tailored anchor than a simple comparison with peers or the broad industry, which may differ in growth, risk or profitability.

Compared with the Fair Ratio of 33.29x, the current P/E of 32.50x indicates the stock screens as slightly undervalued on this metric.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your L3Harris Technologies Narrative

Earlier we mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St’s Community page let you attach a clear story about L3Harris Technologies to your numbers by linking your view of its future revenue, earnings and margins to a forecast. This turns that into a Fair Value you can compare with today’s price, updates it automatically as new news or earnings arrive, and lets you see how one investor might build a more optimistic L3Harris Technologies Narrative closer to the US$443 analyst target while another uses more cautious assumptions closer to US$326. This way, you can decide which story and valuation logic you find most reasonable.

Do you think there's more to the story for L3Harris Technologies? 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.