• If you are wondering whether Lockheed Martin at US$540.33 is offering fair value or trading at a premium, it helps to line up the current share price against several valuation tools.
• The stock has returned 3.2% over the past week, 3.9% over the past month, 8.7% year to date, 14.1% over 1 year, 27.5% over 3 years and 63.1% over 5 years, which gives useful context before comparing price with fundamentals.
• Recent news coverage around Lockheed Martin has continued to focus on its role as a large defense contractor and its exposure to long term government spending. This often influences how investors think about risk and resilience through cycles. Headlines around defense budgets, contract awards and geopolitical tensions can all feed into sentiment around the stock, even when company specific updates are limited.
• Simply Wall St's valuation model gives Lockheed Martin a score of 5 out of 6. This sets up a closer look at how different valuation methods compare and points to an even more complete way of judging value that will be covered at the end of this article.

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

A Discounted Cash Flow model takes estimates of how much cash a company might generate in the future and discounts those amounts back to today, to arrive at an estimate of what the business could be worth now.

For Lockheed Martin, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month Free Cash Flow is about $5.6b. Analysts and internal estimates project annual Free Cash Flow figures such as $6.6b in 2026 and $8.5b in 2030, with further projections out to 2035 provided by Simply Wall St rather than external analysts.

Discounting these projected cash flows back to today gives an estimated intrinsic value of $708.63 per share, compared with the recent share price of about $540.33. On this basis, the DCF output implies the stock is around 23.8% undervalued.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Lockheed Martin is undervalued by 23.8%. Track this in your watchlist or portfolio, or discover 44 more high quality undervalued stocks.

Approach 2: Lockheed Martin Price vs Earnings

For profitable companies, the P/E ratio is a useful way to relate what you pay per share to the earnings that each share generates. It gives a quick sense of how much the market is willing to pay for each dollar of current earnings.

What counts as a "normal" or "fair" P/E depends on how investors view growth prospects and risk. Higher growth expectations or lower perceived risk can justify a higher multiple, while slower growth or higher risk usually point to a lower one.

Lockheed Martin is currently trading on a P/E of 26.0x. This sits below the Aerospace & Defense industry average P/E of about 40.0x and the peer group average of about 47.5x, which suggests the stock is priced more conservatively than many peers using this simple comparison.

Simply Wall St also provides a Fair Ratio of 34.5x, which is an estimate of what P/E might make sense given factors such as earnings growth, profit margins, industry, market cap and company specific risks. This is more tailored than a basic peer or industry comparison. With the current P/E of 26.0x below the Fair Ratio of 34.5x, the multiple-based view points to the stock being undervalued based 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 think about valuation. On Simply Wall St that comes through Narratives, where you attach a clear story about Lockheed Martin to specific assumptions for future revenue, earnings, margins and a fair value estimate. You can then compare that fair value with the current share price to help decide whether the stock looks attractively priced or expensive for your view. All of this is available within an easy Community page tool that updates automatically as new news or earnings arrive, so your story and numbers stay aligned.

In practice, that means different investors can look at the same stock and reach very different fair values. For example, one Community Narrative currently anchors on a fair value of about US$566.77 with relatively cautious assumptions, while another sees fair value closer to US$866.67 using more optimistic inputs. Those opposing views are visible side by side so you can see the full range of expectations and decide which story best fits your own thinking about Lockheed Martin.

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.