Does Lockheed Martin’s Recent Missile Demand Signal a Compelling Valuation Opportunity in 2025?

If you are staring at Lockheed Martin’s recent performance and wondering, “Is this the moment to buy or just take a step back?”, you are not alone. The stock has been anything but dull. After dipping over the past year, Lockheed Martin is showing fresh signs of life, recently climbing 3.5% in the past week and 12.3% over the last 30 days. That has caught the attention of investors looking for both steady growth and new momentum plays.

Two big storylines help explain the latest price swings. For one, headlines that the Pentagon is urging missile suppliers, Lockheed included, to ramp up production have injected optimism about future revenues. In addition, reports of Turkey planning to buy “hundreds” of fighter jets, with Lockheed right in the mix, contribute to a narrative of rising demand and renewed strategic importance. These are not speculative stories, but the sort of news that can redefine long-term prospects and impact how the market values the stock’s risk profile.

But here's where it gets even more interesting for valuation-conscious investors. By the numbers, Lockheed Martin’s value score currently sits at 4 out of 6, a clear sign that the company is undervalued on several key metrics. If you favor buying quality at a discount, this is the kind of signal that is tough to ignore.

In the next section, we will break down the specific valuation checks behind that score, see where Lockheed stands out, and touch on the time-tested methods investors rely on. Stay tuned, because before the end of this article, we will also reveal a smarter approach to valuation that might challenge everything you thought you knew.

Why Lockheed Martin is lagging behind its peers

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

A Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and discounting them back to today’s dollars. This approach is especially useful for companies with clear, measurable cash flow streams such as Lockheed Martin.

According to the latest data, Lockheed Martin’s current Free Cash Flow stands at $3.27 billion. Projections show steady growth, with analysts forecasting annual free cash flows to rise to around $7.38 billion by 2029. For years beyond the analyst window, estimates are extrapolated using industry-standard assumptions. Over the next decade, yearly free cash flow is expected to continue climbing, reflecting confidence in the company’s core business and projected contract wins.

Based on these projections, the model calculates a fair value for Lockheed Martin stock of $572.31 per share. Compared to its current price, this implies the stock is approximately 11.9% undervalued, suggesting there is still a margin of safety for new investors.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Lockheed Martin is undervalued by 11.9%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Lockheed Martin Price vs Earnings

The price-to-earnings (PE) ratio is a classic valuation tool for profitable companies because it directly links a company’s share price to its bottom-line earnings. For investors seeking to compare established, money-making businesses, the PE ratio gives a quick sense of what the market is willing to pay for each dollar of earnings.

It is important to remember that a “normal” or “fair” PE ratio is influenced by the company’s growth prospects and its risk profile. Faster-growing companies or those with more predictable earnings typically warrant higher PE multiples. Conversely, companies facing higher risks or slower growth tend to see lower PE ratios.

As of today, Lockheed Martin’s PE ratio stands at 28.0x. When we compare this to the Aerospace & Defense industry average of 39.1x and a peer average of 33.9x, Lockheed appears conservatively valued. However, it is not just about matching the average, especially if Lockheed’s unique strengths or challenges set it apart from peers.

This is where Simply Wall St's proprietary “Fair Ratio” comes in. The Fair Ratio, which is 33.2x for Lockheed, provides a refined benchmark that takes into account many factors such as industry and peer data, as well as company specifics like earnings growth, profit margins, risk profile, and market capitalization. It presents a more accurate and tailored picture of fair value, beyond broad averages.

Comparing Lockheed’s actual PE of 28.0x to its Fair Ratio of 33.2x suggests the stock is undervalued on an earnings basis, which aligns with what the DCF analysis indicated.

Result: UNDERVALUED

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 Lockheed Martin Narrative

Earlier we mentioned that there is a smarter way to understand valuation, so let us introduce you to Narratives, a simple way to build your investment thesis by connecting Lockheed Martin’s story with its projected financials and estimated fair value.

A Narrative is more than just a number; it is your own reasoned view of why you believe Lockheed Martin’s future revenue, earnings, and margins will look a certain way, shaped by your research and perspective. Narratives let you connect headline drivers (such as surging global demand for defense systems or margin pressures from cost overruns) directly to specific forecasts and a fair value, allowing you to track your belief against real market prices.

On Simply Wall St’s widely-used Community page, Narratives are easy to create and update, making them accessible for all investors, from beginners to experts. They are uniquely powerful because every time key news, earnings reports, or regulatory events emerge, Narratives update dynamically so your investment story stays current and actionable.

For example, some investors, focusing on Lockheed’s leadership in next-generation air and missile systems, set their fair value as high as $544, while others, concerned about regulatory risk and cost overruns, have a far more cautious view at $398. This real-time comparison of your own Fair Value versus the share price means you have a quick, clear framework to decide when to buy, sell, or simply watch from the sidelines.

Do you think there's more to the story for Lockheed Martin? 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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