• If you are wondering whether Lockheed Martin's current share price reflects its underlying worth, this article focuses squarely on what the numbers say about value.
• The stock last closed at US$512.29, with a 10.4% decline over 7 days and a 16.8% decline over 30 days, set against 3.1% year to date, 10.6% 1 year, 21.0% 3 year and 51.3% 5 year returns.
• Recent coverage has focused on how these pullbacks sit against Lockheed Martin's longer term performance record, as investors reassess what they are willing to pay for exposure to the aerospace and defense sector. Commentary has also highlighted how shifts in sentiment toward defense spending, geopolitical risk and contract pipelines may be feeding into the current share price.
• On Simply Wall St's valuation checks, Lockheed Martin scores a 6 out of 6 valuation score, which sets up a closer look at different valuation approaches shortly, as well as an alternative way of thinking about value at the end of the article that can help you put all of these methods in context.

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

A Discounted Cash Flow, or DCF, model estimates what a company might be worth today by projecting its future cash flows and then discounting those back to a single present value figure.

For Lockheed Martin, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $5.55b. Analysts provide explicit free cash flow estimates for several years, and Simply Wall St then extends these out to 2035, with projected free cash flow for 2030 of $8.14b. Each future cash flow is discounted using a required rate of return to reflect timing and risk, then summed to arrive at an equity value per share.

On this basis, the DCF model points to an estimated intrinsic value of about $707.89 per share, compared with the recent share price of $512.29. This implies the shares trade at roughly a 27.6% discount to the model’s estimate of value, so the DCF view is that the stock currently screens as undervalued.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Lockheed Martin is undervalued by 27.6%. Track this in your watchlist or portfolio, or discover 53 more high quality undervalued stocks.

Approach 2: Lockheed Martin Price vs Earnings

For a profitable company like Lockheed Martin, the P/E ratio is a useful way to see how much you are paying for each dollar of earnings. Investors typically accept a higher P/E when they expect stronger growth or see lower risk, and they look for a lower P/E when growth is more modest or risks feel higher.

Lockheed Martin currently trades on a P/E of 24.64x. This sits below the Aerospace & Defense industry average of 36.43x and also below the peer group average of 49.17x, which indicates the stock is priced more conservatively than many of its comparables.

Simply Wall St's Fair Ratio for Lockheed Martin is 34.35x. This is a proprietary estimate of what a "normal" P/E might look like for the company, based on factors such as its earnings growth profile, profit margins, industry, market cap and risk characteristics. Because it is tailored to the company, the Fair Ratio can give a more focused anchor than broad industry or peer comparisons.

Comparing the Fair Ratio of 34.35x with the current P/E of 24.64x shows that the shares trade below this company specific benchmark. On this measure, the stock appears to screen as undervalued.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Lockheed Martin Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives take that next step by letting you attach a clear story about Lockheed Martin to specific forecasts for revenue, earnings, margins and a Fair Value, then compare that Fair Value to the current price to decide whether the stock looks attractive or stretched.

A Narrative on Simply Wall St is a simple, guided framework on the Community page where you spell out what you think is happening at the company, link that view to numbers like future sales, profit margins and an assumed P/E, and see the Fair Value that results from those inputs.

Because Narratives sit on the platform used by millions of investors and update automatically when new news or earnings are added, you are not locked into a static view. Your Lockheed Martin story and the implied Fair Value can adjust as fresh information arrives.

For example, one Lockheed Martin Narrative anchors on a Fair Value of about US$866.67 with higher assumed margins and an 8% revenue growth rate, while another more cautious Narrative points to a Fair Value near US$566.77 and a 3.09% revenue growth rate. This shows how different investors can look at the same company, plug in different expectations, and reach very different conclusions about what the shares are worth today.

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.