• If you are wondering whether L3Harris Technologies at around US$378.48 is offering fair value right now, you are not alone; many investors are asking the same question.
• The stock has recorded returns of 6.6% over the last 7 days, 10.4% over 30 days, 24.3% year to date and 85.7% over 1 year, with 3 year and 5 year returns of 88.6% and 119.3% respectively, which naturally puts a spotlight on what you might be paying for each future dollar of cash flow.
• Recent coverage has focused on L3Harris as a major US defense and aerospace contractor with exposure to government and commercial customers. This helps frame how investors think about its long term contracts and order pipeline. News around industry wide defense spending trends and program awards has also fed into expectations, giving context to these share price moves without relying on short term earnings headlines.
• Simply Wall St currently assigns L3Harris a valuation score of 1 out of 6, meaning it screens as undervalued on only 1 of 6 checks. Next we will look at how different valuation methods arrive at that result and hint at an even deeper way to think about fair value later in the article.

L3Harris Technologies scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: L3Harris Technologies Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a business could be worth today by projecting its future cash flows and then discounting those back to a present value. It focuses on the cash the company is expected to generate for shareholders rather than accounting earnings.

For L3Harris Technologies, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $2.66b. Analyst estimates and internal projections extend this out over the next decade, with free cash flow in 2030 projected at $4.13b, based on a mix of analyst inputs for the earlier years and extrapolated figures for the later years.

Pulling all of those projected cash flows together and discounting them back results in an estimated intrinsic value of about $460.96 per share. At a current share price of roughly $378.48, the DCF implies a 17.9% discount. On this model, the stock screens as undervalued.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests L3Harris Technologies is undervalued by 17.9%. Track this in your watchlist or portfolio, or discover 46 more high quality undervalued stocks.

Approach 2: L3Harris Technologies Price vs Earnings

For profitable companies, P/E is a useful shortcut because it ties what you pay per share directly to the earnings that each share currently generates. It helps you see how many dollars investors are willing to pay for one dollar of earnings.

What counts as a "normal" P/E often reflects growth expectations and risk. Higher expected earnings growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk usually point to a lower, more cautious multiple.

L3Harris currently trades on a P/E of 44.02x, compared with the Aerospace & Defense industry average of 44.00x and a peer group average of 40.29x. Simply Wall St also calculates a Fair Ratio of 38.95x, which is its proprietary estimate of a suitable P/E once it factors in elements like earnings growth, industry, profit margin, market cap and specific risks.

This Fair Ratio can be more tailored than a simple peer or industry comparison because it adjusts for the company’s own profile rather than assuming one size fits all. With the current P/E of 44.02x sitting above the Fair Ratio of 38.95x, the multiple suggests the shares are trading a bit richer than that tailored estimate.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your L3Harris Technologies Narrative

Earlier we mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you attach your own story about L3Harris to the numbers by linking what you believe about its missile spinout, Pentagon funding and sector setup to specific forecasts for revenue, earnings, margins and a fair value. You can then compare that fair value with the current price, with the platform updating your Narrative when new news or earnings appear. One investor might build a more optimistic L3Harris view using the higher analyst price target of US$327.00 and higher assumed revenue growth and P/E, while another might anchor on the lower US$250.00 target and more cautious earnings expectations. You can see both side by side on the Community page to help decide whether the current US$378.48 price lines up with the story you believe.

Do you think there's more to the story for L3Harris Technologies? 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.