• If you are wondering whether L3Harris Technologies is offering fair value at its current price, this article walks through what the numbers are really saying about the stock.
• The shares last closed at US$342.85 after a 3.3% decline over the past week, but they are up 16.8% over 30 days, 12.6% year to date, 64.8% over 1 year and 107.6% over 5 years, which naturally raises questions about how expectations and perceived risk are being priced in.
• Recent news coverage has focused on L3Harris Technologies as a key name in the defense and aerospace space, with headlines often linking the company to large government and commercial contracts. That kind of attention can influence sentiment around long term demand and may help explain some of the stronger share price performance figures you are seeing.
• Right now, L3Harris Technologies scores 2 out of 6 on Simply Wall St's valuation checks, and you can see the breakdown in this valuation score. Next, we will walk through the main valuation approaches used for the stock and then finish with a different way of looking at value that brings all of these pieces together.

L3Harris Technologies scores just 2/6 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 takes the cash L3Harris Technologies is expected to generate in the future and discounts those projections back to what they might be worth in today’s dollars.

For L3Harris Technologies, the latest twelve month Free Cash Flow is about $2.66b. Analysts have provided forecasts out to 2028, with Simply Wall St extending those cash flow projections further using a 2 Stage Free Cash Flow to Equity model. On this basis, projected Free Cash Flow for 2035 is $4.56b, with each future year discounted back to reflect the time value of money.

Bringing all of those discounted cash flows together, the model arrives at an estimated intrinsic value of about $394.14 per share. Compared with the recent share price of $342.85, the DCF output suggests the stock is around 13.0% undervalued.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests L3Harris Technologies is undervalued by 13.0%. Track this in your watchlist or portfolio, or discover 868 more undervalued stocks based on cash flows.

Approach 2: L3Harris Technologies Price vs Earnings

For a profitable company like L3Harris Technologies, the P/E ratio is a straightforward way to see what the market is currently paying for each dollar of earnings. It ties the share price directly to the bottom line, which is usually the key driver of long term value for most investors.

What counts as a “normal” or “fair” P/E depends on what the market expects for future growth and how risky those earnings are perceived to be. Higher expected growth or lower perceived risk can support a higher P/E, while slower growth or higher uncertainty may point to a lower one.

L3Harris Technologies is trading on a P/E of 39.93x, compared with a peer average of 36.75x and an Aerospace & Defense industry average of about 41.63x. Simply Wall St’s Fair Ratio for the stock is 31.43x, which is its proprietary estimate of an appropriate P/E once factors like earnings growth, profit margins, industry, market cap and risks are taken into account. This makes it more tailored than a simple comparison against peers or the broad industry, which may not share the same characteristics.

With the current P/E of 39.93x above the Fair Ratio of 31.43x, the multiple suggests L3Harris Technologies is trading at a premium to what this framework would consider fair.

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, so let us introduce you to Narratives, a simple way for you to attach a clear story to your numbers, including your view on fair value and your estimates for future revenue, earnings and margins.

A Narrative connects three pieces together: the company story you believe in, the financial forecast that flows from that story, and the fair value estimate that falls out of those forecasts.

On Simply Wall St, millions of investors use Narratives on the Community page as an easy tool to compare their own fair value with the current market price, see how others differ, and get automatic updates when fresh news or earnings are released so their view is always based on the latest information.

For L3Harris Technologies, one Narrative might assume a higher fair value because the author expects stronger long term contract revenue and robust margins, while another might set a lower fair value based on more cautious revenue growth and tighter profit assumptions, giving you a clear range of perspectives to consider alongside your own.

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.