How China’s Mineral Limits Shape the Investment Case for L3Harris Technologies in 2025

If you are weighing your options on L3Harris Technologies, you are not alone. The stock has captured a lot of attention from investors recently, and for good reasons. While its last close stood at $286.19, L3Harris has delivered a strong year-to-date return of 38.0%, and is up 24.3% over the past year. Even looking further back, the stock has climbed an impressive 80.3% over the last five years, showing solid, long-term momentum.

Some of this upward movement can be connected to bigger-picture headlines. Ongoing shifts in U.S. defense budgets, including proposed increases in spending on missiles and drones, have added a sense of security about future revenue streams. At the same time, recent global developments, like China's move to restrict supplies of critical minerals, highlight both supply chain vulnerabilities and the essential roles played by defense contractors like L3Harris. These are not just passing stories; they shape how the market perceives risk and growth for the entire sector.

When it comes to valuation, L3Harris lands right in the middle. Our value scoring system awards the company a 3 out of 6, meaning it looks undervalued in half the key checks we run. That score suggests there may be some market upside still left to capture, but you will want to dig deeper into the details before making a call.

Up next, we will break down the main valuation approaches to see where L3Harris really stands. And stick around, because we will also share an even more holistic way to look at valuation, something you may not want to miss.

Why L3Harris Technologies is lagging behind its peers

Approach 1: L3Harris Technologies Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model works by estimating a company’s future free cash flows and then discounting those amounts back to today’s value. The goal is to find an intrinsic value that reflects what the business is actually worth right now, based on its ability to generate cash in the years ahead.

For L3Harris Technologies, the most recent full-year Free Cash Flow (FCF) was $2.1 Billion. Analyst estimates project FCF growing steadily over the next few years, reaching $3.53 Billion by the end of 2029. Simply Wall St extrapolates additional growth through 2035. These projections help anchor the DCF model, which relies on both expert forecasts for the next five years and logically extended estimates beyond that.

Using the 2 Stage Free Cash Flow to Equity method, the intrinsic value for L3Harris shares is $329.82, compared to the current price of $286.19. According to the DCF, the stock is trading at a discount of 13.2% to its estimated fair value.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for L3Harris Technologies.

Our Discounted Cash Flow (DCF) analysis suggests L3Harris Technologies is undervalued by 13.2%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: L3Harris Technologies Price vs Earnings

For profitable companies like L3Harris Technologies, the Price-to-Earnings (PE) ratio is a go-to valuation metric. It helps investors see how much they are paying for each dollar of earnings, providing a quick way to gauge whether a stock might be undervalued or overvalued compared to its profitability.

However, what counts as a "fair" PE ratio depends on more than just the bottom line. Higher growth expectations or lower risk can justify a premium, while slower-growing or riskier companies might deserve a discount. Companies in the aerospace and defense sector, like L3Harris, are often compared against industry peers and averages for additional context.

L3Harris currently trades at a PE of 31.55x. This is below the industry average of 38.06x and also lower than the peer average of 34.99x. At first glance, this could hint that the stock is relatively inexpensive. But it is important to consider not just where the stock sits in relation to its peers, but what the "Fair Ratio" should be for this specific company.

Simply Wall St’s Fair Ratio for L3Harris is 27.77x. The Fair Ratio is especially useful because it takes a more nuanced approach, reflecting not only earnings growth, but also the company's profit margin, market cap, risks, and its position within the wider industry. This makes it a more holistic and insightful benchmark than simple peer or industry comparisons.

Comparing the Fair Ratio to the actual PE, L3Harris is trading just above the level justified by its fundamentals. This suggests the stock is a bit on the expensive side as investors are paying a slight premium over what the underlying business metrics might warrant.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your L3Harris Technologies Narrative

Earlier, we mentioned there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is simply your story behind the numbers; it is how you connect your views on a company’s future revenue, earnings, and margins to a fair value, tying together what L3Harris does, what will shape its prospects, and where the stock should trade.

On Simply Wall St, Narratives make this process easier and more transparent by letting millions of investors on the Community page set their own forecasts and see how fair value changes as new information like earnings or news arrives. With Narratives, you are not just crunching numbers; you are connecting the company’s story to a financial model and then making confident, informed decisions on when to buy or sell by comparing your own fair value to the current market price.

For L3Harris Technologies, this means one investor could base their Narrative on optimism about U.S. defense initiatives and predict a fair value of $327.00, while another, more cautious on potential risks, may set theirs at $250.00. Narratives keep updating as the story evolves, so your investment decisions always align with the latest company outlook.

Do you think there's more to the story for L3Harris Technologies? Create your own Narrative to let the Community know!

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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