Rocket Lab (RKLB) stock is in focus after the company executed two successful launches from different countries within about a week and reported record revenue, record GAAP gross margins, and a US$1.85b backlog.

Despite a 5% one day share price decline and softer 1 week and 1 month share price returns, Rocket Lab’s roughly 11% 3 month share price gain sits alongside a very large 1 year total shareholder return. This suggests that longer term momentum remains strong even as short term sentiment reacts to rapid launch cadence, defense contract news, insider selling and a rich valuation backdrop.

If these launch headlines have you thinking more broadly about space and defense exposure, it could be worth scanning 30 robotics and automation stocks as another way to uncover companies tied to automation and advanced engineering themes.

With record revenue, record GAAP gross margins, a US$1.85b backlog and a very large 1 year total shareholder return already on the table, is Rocket Lab still undervalued, or is the market already pricing in future growth?

Most Popular Narrative: 30.1% Undervalued

Rocket Lab last closed at $68.37, while the most followed narrative on the stock, according to KiwiInvest, points to a fair value closer to the high $90s. That gap reflects a very optimistic long term view of the space economy and Rocket Lab’s place in it.

The global "space economy" is forecasted to be worth approximately $1.8 trillion by 2035. Roughly $800 billion is estimated to be made up of "backbone" business, such as satellites and rockets, and the services or software required to enable them, such as internet and positioning technologies. The remaining $1 trillion is estimated to be made up of businesses which operate on top of that backbone. For example, super-accurate position tracking enables faster package delivery or even autonomous drone delivery. Higher quality (and cheaper) satellite photography enables farmers to inspect their crops from satellite images and compare growth between paddocks from the office rather than travelling around the farm all day.

Curious how this fair value comes together? The narrative leans heavily on rapid revenue expansion, rising margins and a future earnings multiple that many investors usually associate with mature growth leaders. If you want to see how those moving parts stack into that valuation, the full story is worth a look.

Result: Fair Value of $97.83 (UNDERVALUED)

However, this story could change quickly if Neutron stumbles, or if working capital gets stretched by lumpy revenue and ongoing net losses of US$198.209m.

Another View: DCF Points to Overvaluation

KiwiInvest’s narrative points to a fair value of $97.83 and calls Rocket Lab undervalued. Our DCF model tells a very different story. It estimates future cash flows at just $7.90 per share, which implies the stock screens as heavily overvalued using this method. Which framework do you trust more when cash flows are still negative?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Rocket Lab for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 47 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

All this mixed sentiment around valuation, growth potential and execution risk can feel like a lot, so take a moment to review the numbers yourself and form your own take. To help frame that view, it is worth weighing the company’s key concerns against the potential upsides highlighted in our 1 key reward and 3 important warning signs.

Looking for more investment ideas?

If Rocket Lab has sharpened your interest, do not stop here. Use the Simply Wall St screener to quickly spot other opportunities that fit your style.

• Target stability first by checking companies in the 68 resilient stocks with low risk scores that aim to keep risk scores on the lower side.
• Hunt for value by reviewing our 47 high quality undervalued stocks and see which names currently stand out on both quality and price.
• Chase income potential by scanning the 15 dividend fortresses and see which businesses offer higher yields with a focus on resilience.

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.