• Investors may be wondering if Lockheed Martin at around US$533 per share is still offering value, or if most of the opportunity is already priced in.
• The stock has returned 3.3% over the past week, 3.9% over the past month, 7.3% year to date and 16.8% over the last year. This naturally raises questions about how much upside or downside is left.
• Recent headlines have focused on Lockheed Martin's role as a large U.S. defense contractor, with attention on its major programs and long term government contracts. This context helps frame why the stock has drawn interest from investors watching defense spending and contract pipelines.
• Simply Wall St's valuation model gives Lockheed Martin a 5 out of 6 score on its value checks. The next sections will walk through how different valuation approaches assess the stock, and then finish with a broader way to think about value beyond a single model.

Approach 1: Lockheed Martin Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a stock could be worth by projecting the company’s future cash flows and discounting them back to today’s value. It focuses on cash the business can return to shareholders rather than accounting profits.

For Lockheed Martin, the model uses a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about US$5.6b. Analysts provide explicit forecasts for several years, and Simply Wall St then extrapolates further out, with projected free cash flow of US$8.5b in 2030 and additional estimates through 2035. All figures are in US$.

When these projected cash flows are discounted back to today, the DCF model suggests an intrinsic value of about US$714.36 per share, compared with a current share price around US$533. On this basis, the stock screens as roughly 25.4% undervalued, according to this specific cash flow model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Lockheed Martin is undervalued by 25.4%. Track this in your watchlist or portfolio, or discover 49 more high quality undervalued stocks.

Approach 2: Lockheed Martin Price vs Earnings

For a profitable company, the P/E ratio is a useful yardstick because it links what you pay for the stock to the earnings it currently generates. Investors usually accept a higher or lower P/E depending on what they expect for future earnings growth and how much risk they see in the business.

Lockheed Martin currently trades on a P/E of 25.65x. This sits below the Aerospace & Defense industry average of 35.63x and well below the peer group average of 46.82x, which might suggest a lower market valuation compared with many other defense stocks.

Simply Wall St also calculates a proprietary “Fair Ratio” for P/E, which blends factors such as earnings growth, profit margins, industry, market cap and specific risks into a single benchmark. This is designed to be more tailored than a simple comparison with industry or peer averages, which can be skewed by outliers or companies at very different stages.

For Lockheed Martin, the Fair Ratio is 36.56x, above the current P/E of 25.65x, which points to the stock being undervalued on this metric.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Lockheed Martin Narrative

Earlier it was mentioned that there is an even better way to understand valuation, and on Simply Wall St this is done through Narratives. You set out a clear story for a company, link that story to assumptions for future revenue, earnings and margins, and the platform automatically turns it into a financial forecast and a Fair Value. That Fair Value can then be compared with the current share price to inform buy or sell decisions, and everything is kept up to date as news or earnings arrive.

On the Lockheed Martin Community page, for example, one Narrative currently anchors on a Fair Value of about US$673.88 per share, while another is closer to US$866.67. These reflect very different views on factors such as defense demand, margins and discount rates, and show how reasonable investors can look at the same stock, apply their own expectations, and reach different Fair Values that the system then tracks and refreshes as new information comes in.

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.