Northrop Grumman (NOC) is back in focus after securing a US$312.34 million contract modification from the U.S. Navy for its Surface Electronic Warfare Improvement Program Block Three systems, extending work through August 2029.

That electronic warfare contract arrives as Northrop Grumman’s share price has rebounded in the very short term, with a 1-day share price return of 5.59% and 7-day share price return of 9.95%. However, the 90-day share price return is down 21.85%, while the 1-year total shareholder return of 10.59% points to momentum that has been stronger over the longer run than in recent months.

If this contract has you thinking more broadly about defense and advanced hardware, it could be a good moment to scan other robotics and automation opportunities using the 30 robotics and automation stocks.

With Northrop Grumman shares recovering in the very short term but still down over 90 days, and trading near estimates of intrinsic value, the key question is whether this contract leaves upside on the table or if markets are already pricing in future growth.

Most Popular Narrative: 21.2% Undervalued

At a last close of $549.01 against a narrative fair value of $696.95, Northrop Grumman is framed as materially undervalued, with the gap tied to long term defense and space program assumptions.

The ramp up of advanced autonomous and integrated systems such as Beacon and IBCS, combined with ongoing investments in solid rocket motor capacity (targeting a near doubling by 2029), positions the company to capitalize on high growth, higher margin market segments, thereby enhancing future operating margins and underlying cash flow.

Want to see what sits behind that optimism on margins and cash flows? The narrative leans on steady top line expansion, resilient profitability, and a richer future earnings multiple tied to these programs. The full breakdown shows how those ingredients add up to the projected fair value.

Result: Fair Value of $696.95 (UNDERVALUED)

However, Northrop Grumman’s reliance on large U.S. defense programs and heavier capital expenditure needs could pressure margins and weaken the case for a higher valuation.

Another View: Northrop Grumman Through the P/E Lens

While the narrative fair value suggests Northrop Grumman is undervalued, its current P/E of 17x sits well below the US Aerospace & Defense industry at 40.2x and below a fair ratio of 27.8x. That gap signals potential valuation upside, but also raises a question: is the discount compensating for slower expected growth and higher debt, or is the market overly cautious?

To see how this valuation gap compares across peers and how the fair ratio could evolve over time, take a look at the See what the numbers say about this price — find out in our valuation breakdown..

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Northrop Grumman 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 43 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

If you are uncertain about Northrop Grumman given the mix of optimism and caution, consider reviewing the numbers and sentiment yourself by exploring the 4 key rewards and 1 important warning sign

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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.