A Look at General Dynamics's Valuation After $642 Million Submarine Contract Win

If you have been following General Dynamics (GD) lately, the latest $642 million contract modification for its Electric Boat unit is hard to miss. Announced as an expansion of their existing agreement with the U.S. Navy, this move reinforces General Dynamics’ pivotal role in building and supporting Virginia-class submarines, a key area of national security and technological innovation. For shareholders and prospective investors alike, the scale and visibility of this contract could signal lasting demand anchored in defense priorities.

Looking at the broader picture, this contract win comes on the heels of several major developments. Just recently, General Dynamics secured an IT modernization deal for U.S. Strategic Command and expanded its partnership with Daimler Truck to target growth in military vehicles. Against this active backdrop, GD shares have climbed 12% over the past year and surged 27% year-to-date, with momentum appearing to accelerate in the past three months. The stock’s performance suggests that enthusiasm is building, but as always, the big question is how much of this future growth is already reflected in today’s price.

So, after this latest jump, is General Dynamics offering a value opportunity, or is the market already baking in all of tomorrow’s wins?

Most Popular Narrative: 2.2% Undervalued

The prevailing narrative suggests General Dynamics is trading at a modest discount to its estimated fair value. According to the analysis, the shares are currently positioned roughly 2% below where consensus believes they should be, based on future prospects and risks.

Robust multi-year order intake and record backlog, driven largely by increased global defense spending and rising geopolitical instability, provide strong visibility into future revenue growth across key segments, especially Marine and Aerospace. Accelerating investment in secure communications, IT modernization, and cyber defense solutions is fueling growth in the Mission Systems and GDIT divisions. This aligns with increased government and enterprise focus on digital transformation and cyber resilience and should support margin and earnings expansion as these mix shifts take hold.

Want to uncover the numbers behind that “undervalued” tag? The real surprise lies in aggressive financial projections and a future profit multiple that puts General Dynamics in the spotlight among peers. Intrigued about what drives analysts to see upside and what assumptions fuel their optimism? The full narrative breaks down these make-or-break growth bets in detail.

Result: Fair Value of $337.94 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent supply chain disruptions or unexpected shifts in defense procurement priorities could quickly challenge even the most optimistic outlook for General Dynamics.

Find out about the key risks to this General Dynamics narrative.

Another View: What Does the SWS DCF Model Say?

While the main narrative leans on market expectations, our DCF model comes to a similar conclusion and also places General Dynamics in undervalued territory. But can relying on projected cash flows really capture the twists of this industry?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out General Dynamics 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 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own General Dynamics Narrative

If you see the story differently, or want to dig into the numbers firsthand, crafting your own take is just minutes away with our tools. Do it your way.

A good starting point is our analysis highlighting 5 key rewards investors are optimistic about regarding General Dynamics.

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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.

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