Lockheed Martin stock has climbed 79.4% over the past five years, yet Simply Wall St's valuation work suggests the shares may still trade below intrinsic value. Both the Discounted Cash Flow (DCF) estimate and market multiples point to an undervalued setup rather than an overly stretched one.

• Over the last five years, a 79.4% total return indicates investors have already priced in a lot of good news. The key question is whether the current level still leaves a margin between price and underlying worth.
• The record contract backlog and new programs in missiles and logistics support can underpin expectations for future cash flows. At the same time, execution risks on large, complex defense projects may still affect how much of that value ultimately reaches shareholders.
• On Simply Wall St's broader valuation checks, Lockheed Martin screens as undervalued in 5 of 6 areas. This leans toward the stock looking cheap rather than fully priced in.

The issue now is whether that apparent discount to intrinsic value is large enough to compensate you for the execution and contract risk that comes with owning Lockheed Martin at today’s price.

Is Lockheed Martin Still Cheap on Cash Flow?

The Discounted Cash Flow (DCF) model here uses projected cash flows to estimate what Lockheed Martin could be worth today. In this framework, the latest twelve month free cash flow sits at about $8.57b, with the model assuming generally growing cash flows rather than sharp swings, and then discounting them back using a 2 stage Free Cash Flow to Equity approach.

Those cash flows translate into an estimated intrinsic value of about $780 per share, which is roughly 25.3% above the current share price, so the stock screens as undervalued on this method. Because Lockheed Martin recently reported Q2 2026 results and raised full year guidance on a record backlog, the continued discount implied by the DCF indicates that the market is still assigning a sizable cushion for execution and contract risk.

On these cash flow assumptions, Lockheed Martin stock appears undervalued, with the market price sitting below the DCF implied intrinsic value.

Our Discounted Cash Flow (DCF) analysis suggests Lockheed Martin is undervalued by 25.3%. Track this in your watchlist or portfolio, or discover 49 more high quality undervalued stocks.

Is Lockheed Martin a Bargain on Earnings?

P/E is a useful yardstick for Lockheed Martin because earnings per share sit at the center of how many investors look at mature, cash generative defense contractors. On this basis, Lockheed Martin trades on about 21.4x earnings, compared with an Aerospace & Defense industry average of roughly 39.0x and a broader peer average near 48.4x.

Simply Wall St’s fair P/E ratio for Lockheed Martin is about 33.8x, which already factors in the company’s growth profile, margins, scale and risk. Against that yardstick, the current 21.4x multiple implies a sizeable discount. This indicates the market is not paying as high a price for each dollar of Lockheed Martin earnings as the model would indicate.

On the P/E multiple alone, Lockheed Martin stock appears undervalued relative to both its tailored fair ratio and sector benchmarks.

The Lockheed Martin Narrative: What Would Justify Today's Price?

Simply Wall St Narratives for Lockheed Martin pick up where the valuation work leaves off, by spelling out which paths for Lockheed Martin's growth, margins and earnings would justify a materially higher or lower share price than today and setting these out clearly on the Community page. Instead of stopping at a single ratio or model output, they unpack the future conditions that figure assumes, so you can see what needs to happen and monitor whether it is playing out over time.

The community is split on Lockheed Martin, with one camp focused on missile backlog and contracts, and the other on budget shifts and margin pressure.

Bull case: roughly fairly valued

"Demand for advanced platforms such as the F-35, PAC-3, THAAD, and hypersonic weapons is being reinforced by actual combat use and rising geopolitical tensions…"

Bear case: 14% overvalued

"The company's continued high reliance on a small set of large programs, including the F-35 and classified Aeronautics projects, creates significant vulnerability to evolving defense priorities or budget cuts…"

Do you think there's more to the story for Lockheed Martin? Head over to our Community to see what others are saying!

The Bottom Line

For Lockheed Martin, both the Discounted Cash Flow (DCF) intrinsic value estimate and the earnings multiple view point to the stock looking undervalued rather than fully priced. The key question is whether that DCF discount and lower P/E versus peers are enough to compensate you for execution and contract risks on a concentrated portfolio of large programs. The crux from here is whether cash flows tied to the record backlog are delivered reliably enough for the market to narrow that discount, or whether those same risks keep the stock trading on a structurally lower multiple.

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.