Does Lockheed Martin’s Recent Share Rebound Signal Opportunity in 2025?

If you are considering what to do with your Lockheed Martin stock, you are in good company. For a company with such an iconic place in America’s defense sector, Lockheed Martin’s share price journey has kept investors both intrigued and cautious over the past year. After a strong multi-year run, the stock is now down nearly 17.5% over the past twelve months, even as the broader market has marched higher. Looking closer, this recent dip may have opened the door for new opportunities, especially in light of growing global demand for defense capabilities. Short-term moves have seen some volatility, with the last month delivering a healthy 6.4% climb after a tough start to the year. Despite a modest pullback over the last quarter, investors are beginning to see renewed interest, partly fueled by headlines about increased defense budgets worldwide and ongoing geopolitical tensions. What matters most, though, is whether the current stock price truly reflects Lockheed Martin’s value or if the market is missing something important. To help bring some clarity, we have run Lockheed Martin through six different valuation checks, and the company passes five out of six for undervaluation. That results in a value score of 5, which is an impressive outcome that hints at upside potential. Of course, the numbers only tell part of the story. In the next section, we will break down these valuation methodologies in plain English before sharing one underrated way to think about valuation that often gets overlooked by even the pros. Lockheed Martin delivered -17.5% returns over the last year. See how this stacks up to the rest of the Aerospace & Defense industry.

Approach 1: Lockheed Martin Cash Flows

A Discounted Cash Flow (DCF) model works by estimating the cash a company will generate in the future and then adjusting those future cash flows back to today's value. This process helps reveal what the business may actually be worth if you owned it entirely for the long term.

Lockheed Martin currently generates roughly $3.27 billion in Free Cash Flow over the last twelve months. Analysts are projecting meaningful growth, expecting Free Cash Flow to reach $8.80 billion by 2035. Each year, these future cash flows are discounted to reflect their present value. This captures both expected growth and the risks of time and uncertainty.

Bringing together all projected cash flows, the DCF analysis estimates Lockheed Martin's intrinsic value at $577 per share. Compared to the current market price, this suggests the stock is trading 22.7% undervalued. In other words, there may be a significant margin of safety for new or existing investors.

Result: UNDERVALUED

Our DCF analysis suggests Lockheed Martin is undervalued by 22.7%. Track this in your watchlist or portfolio, or discover more undervalued stocks based on DCF analysis.

Approach 2: Lockheed Martin Price vs Earnings (PE Ratio)

For companies like Lockheed Martin that reliably generate profits year after year, the Price-to-Earnings (PE) ratio is a widely used and relevant tool for valuation. The PE ratio tells investors how much they are paying today for every dollar of the company’s earnings. This makes it a natural fit when assessing stable, profitable firms.

It is important to remember that a “normal” or “fair” PE ratio is shaped by expectations for future earnings growth and the risks tied to that growth. A company with faster growth or lower risks generally deserves a higher PE, while the opposite is true for slower growth or elevated risks.

Lockheed Martin currently trades at a PE ratio of 24.8x. To put this into context, the average PE ratio for the Aerospace & Defense industry is 34.7x, and the company’s listed peers average 34.3x. Based on factors like Lockheed’s growth outlook, profitability, and risk profile, Simply Wall St’s proprietary Fair Ratio stands at 32.3x. In this case, the Fair Ratio and the actual PE are notably different, with Lockheed Martin’s shares trading at a discount to both the industry and its calculated fair value. This suggests the stock is undervalued by this measure.

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

A Narrative is more than just numbers; it is your story or perspective about a company’s future. It is how you see its growth, challenges, and potential, linked directly to forecasts of revenue, earnings, and margins, which combine to form your view of fair value.

Narratives give context and meaning to data by connecting what you believe is really happening with the business to sensible financial targets. You can then use that story to judge whether the current price is fair, too high, or a bargain.

On Simply Wall St, Narratives are made easy and accessible. This allows millions of investors to create, share, and update their stories as new information emerges, such as earnings reports or breaking news. This approach helps everyone make timely and informed buy or sell decisions.

When you choose or create a Narrative, you can instantly compare your fair value estimate to the market price and see how it shifts as the facts change. This makes investment decisions grounded in your convictions and the latest developments.

For example, with Lockheed Martin, one investor’s Narrative values the stock as high as $670 based on advancing technologies and global demand. Another investor, however, sees it as low as $398 because of regulatory and budget risks. Your Narrative helps you choose which story and forecast makes the most sense for you.

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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