• If you are wondering whether Lockheed Martin's current share price reflects its underlying value, you are not alone. The stock has attracted a lot of attention from investors asking the same question.
• At a last close of US$652.58, Lockheed Martin's share price is sitting alongside return figures of 4.7% over 7 days, 13.9% over 30 days, 31.3% year to date, 58.8% over 1 year, 48.9% over 3 years and 123.2% over 5 years.
• Recent news coverage around Lockheed Martin has focused on wider defense sector interest and ongoing contract activity. This helps frame how investors are thinking about the stock today, and these headlines give useful context for assessing whether the current price reflects expectations around future programs, budgets and competitive positioning.
• Simply Wall St's valuation model currently gives Lockheed Martin a valuation score of 4 out of 6, which means it screens as undervalued on four of the six checks used. Next, we will walk through the key valuation approaches before finishing with a different way of looking at what the market might be pricing in.

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

A DCF model estimates what a company might be worth by projecting its future cash flows and discounting them back to today, so you can compare that value with the current share price.

For Lockheed Martin, Simply Wall St uses a 2 Stage Free Cash Flow to Equity model based on cash flow projections. The latest twelve month free cash flow is about $6.79b. Analyst based and extrapolated estimates point to projected free cash flow of $7.59b in 2030, with a series of annual forecasts between 2026 and 2035 that are discounted back to their present values.

Putting all those discounted cash flows together gives an estimated intrinsic value of about US$673.26 per share. Compared with the recent share price of US$652.58, the model suggests the stock trades at roughly a 3.1% discount, which is a small gap rather than a major mismatch.

Result: ABOUT RIGHT

Lockheed Martin is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Approach 2: Lockheed Martin Price vs Earnings

P/E is a useful yardstick for profitable companies because it links what you pay today with the earnings the business is already generating. It also naturally captures what the market thinks about future prospects and risk, since investors usually accept a higher P/E only if they see stronger earnings potential or feel more comfortable with the risk profile.

Lockheed Martin currently trades on a P/E of 29.93x. That sits below the Aerospace & Defense industry average of 41.56x and the peer group average of 53.49x, so on simple comparisons the stock is priced at a lower multiple of earnings than many rivals.

Simply Wall St’s Fair Ratio for Lockheed Martin is 35.89x. This is a proprietary P/E estimate that aims to reflect what might be reasonable for the company given factors such as its earnings growth profile, profit margins, size, industry and specific risks. Because it blends these company specific inputs, the Fair Ratio can offer a more tailored reference point than a plain industry or peer average. Compared with the current P/E of 29.93x, the Fair Ratio sits higher, which points to the shares screening as undervalued on this measure.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Lockheed Martin Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. This is a simple tool on Simply Wall St’s Community page that lets you attach your own story about a company to the hard numbers, from your assumptions about future revenue, earnings and margins through to an implied fair value. You can then compare that fair value with the current price to decide whether the stock looks interesting to you. The Narrative also updates as new news or earnings come in. This is why one Lockheed Martin investor might plug in a higher fair value of about US$605 per share while another uses a more cautious US$398 per share, and both can clearly see how their different views on growth, margins, discount rates and future P/E lead to very different conclusions.

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.