Lockheed Martin (LMT) has just broken ground on a new 87,000 square foot Munitions Production Center in Troy, Alabama, as part of a multi year investment of more than US$9 billion to expand missile defense output.

Recent contract wins in Canada and with the U.S. Navy, alongside the Alabama munitions expansion and upcoming Bernstein conference appearance, sit against a share price of US$531.14. Short term returns have been softer after a 90 day decline of 17.22%, while a 1 year total shareholder return of 16.10% and 5 year total shareholder return of 56.80% point to material value creation over time.

If this missile defense build out has your attention, it could be a good moment to scan the wider defense supply chain through 35 power grid technology and infrastructure stocks

So, with Lockheed Martin investing more than US$9b into expanded missile defense capacity, trading at US$531.14 and sitting at a 25.24% intrinsic discount, is there still a buying opportunity here, or is future growth already priced in?

Most Popular Narrative: 21.2% Undervalued

According to the most followed narrative, Lockheed Martin's fair value of $673.88 sits well above the last close at $531.14, framing that US$9b expansion against a materially higher long term valuation anchor.

Aero + Defense is the cash engine: demand is strong, backlog is huge, and missiles are in high demand.

But recent results show a gap: revenue is growing, yet profits/margins did not grow as cleanly, especially in Space and some mission systems.

This narrative leans on steady revenue expansion, firmer margins and a richer future earnings multiple tied to missile programs and space, but the exact numbers driving that $673.88 fair value are where the real story starts.

Result: Fair Value of $673.88 (UNDERVALUED)

However, this hinges on margins actually improving and large scale programs staying on schedule. Any disappointment here could quickly challenge that 21.2% undervaluation story.

Next Steps

If this mix of optimism and concern feels familiar, now is a good time to review the full picture for yourself and see how the potential upsides stack up against the risks by checking out the 4 key rewards and 1 important warning sign

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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.