With Lockheed Martin back on many investors' radar, the key question is whether the current share price still reflects good value or if most of the opportunity has already been priced in.

The stock last closed at US$507.40, with returns that include a decline of 0.7% over the past week and 4.5% over the past month, while sitting at gains of 2.1% year to date and 13.6% over the last year.

Recent coverage has continued to focus on Lockheed Martin's role as a major defense contractor and its exposure to large, long term government contracts. This helps frame how investors think about both risk and stability. Broader sector attention has also kept interest in the stock elevated, giving important context to the share price moves seen in recent months.

On Simply Wall St's 6 point valuation framework, Lockheed Martin currently records a value score of 6. The sections that follow will compare different valuation methods before circling back to a more comprehensive way of thinking about what that score really means for long term investors.

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

A Discounted Cash Flow, or DCF, model estimates what Lockheed Martin stock might be worth by projecting future cash flows and discounting them back to today using a required return. It focuses on the cash that could theoretically be returned to shareholders over time.

For Lockheed Martin, the model uses a 2 Stage Free Cash Flow to Equity approach. The latest twelve month Free Cash Flow is about $5.55b. Analysts and extrapolated estimates provided to Simply Wall St project Free Cash Flow reaching $8.50b in 2030, with intermediate projections between 2026 and 2035 ranging from roughly $6.65b to $11.05b before discounting. All figures are in $ and projections beyond the typical 5 year analyst horizon are extrapolated.

When those projected cash flows are discounted back, the DCF output indicates an estimated intrinsic value of about $709.45 per share, compared with the current share price of $507.40. That implies the stock is around 28.5% below this DCF estimate, which indicates that, according to this model, Lockheed Martin may be trading at a meaningful discount.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Lockheed Martin is undervalued by 28.5%. 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 like Lockheed Martin, the P/E ratio is a useful way to think about valuation because it links what you pay today to the earnings the company is currently generating.

In general, investors tend to accept a higher P/E when they expect stronger earnings growth or see the business as lower risk, and a lower P/E when growth expectations are modest or risks appear higher. So the question is not whether a P/E is high or low in isolation, but whether it fits the company’s profile.

Lockheed Martin currently trades on a P/E of 24.41x. This sits below the Aerospace & Defense industry average P/E of 38.92x and the peer average of 49.98x. Simply Wall St’s proprietary Fair Ratio for Lockheed Martin is 34.19x, which reflects factors such as its earnings growth profile, profit margins, industry, market cap and risk characteristics.

The Fair Ratio is more tailored than a simple comparison with peers or the broad industry because it adjusts for the company’s own fundamentals rather than assuming all stocks should trade on similar multiples.

Since Lockheed Martin’s current P/E of 24.41x is below the Fair Ratio of 34.19x, the stock screens as undervalued on this earnings based approach.

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, so Simply Wall St introduced Narratives, where you pick or create a story about Lockheed Martin, translate that view into assumptions for future revenue, earnings and margins, link those assumptions to a Fair Value, and then compare that Fair Value with the current price to help decide whether to buy, hold or sell. All of this happens inside an accessible tool on the Community page that updates automatically when new news or earnings arrive. Narratives can span very different viewpoints, from a more cautious community Narrative with a Fair Value of about US$566.77 per share to a more optimistic Narrative closer to US$741.14 or even US$866.67, depending on how each investor interprets Lockheed Martin’s backlog, missile capacity expansion, space opportunity and policy risks.

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.