Lockheed Martin (LMT): A Fresh Look at Valuation Following Korea Zinc Supply Chain Agreement

If you have been following Lockheed Martin (LMT), the recent news of a memorandum of understanding with Korea Zinc should definitely catch your eye. This agreement sets up a new "China-free" supply chain for germanium, a critical mineral in high-tech defense and space systems, at a time when resource concentration and supply risks are front and center for investors and world governments. Lockheed Martin’s proactive step to secure this strategic partnership underscores its commitment to supply chain resilience and its adaptability amid rising geopolitical uncertainty around critical materials.

In the context of this news, Lockheed Martin's stock has shown some interesting movement. While the past month has seen shares climb over 8%, momentum over the year has faded, with a roughly 17% drop compared to last year’s levels. This comes despite record order backlogs and ongoing expansion into new international collaborations, such as work with the Philippines on advanced fighter programs. The mix of strong business developments alongside a softer share price creates a fascinating tension for investors weighing the impact of recent initiatives.

With Lockheed Martin making headway on strategic supply chains but the market showing caution, the current environment raises questions for value-seeking buyers about whether this presents an opportunity or if Wall Street is simply pricing in a riskier path ahead.

Most Popular Narrative: 6.5% Undervalued

According to community narrative, Lockheed Martin's current share price is considered undervalued by 6.5% relative to its fair value estimate. Analysts believe this discount is rooted in a blend of future growth assumptions, margin expansion, and expected earnings improvements, all weighed against ongoing industry headwinds.

Lockheed Martin's technological leadership in areas like stealth, electronic warfare, hypersonics, and integrated air/missile defense systems is supported by operational success and customer priorities. This strengthens the outlook for future contract wins and an expanding addressable market, which could increase revenues and create opportunities for higher-margin, next-generation products.

Curious about the market forecast that shapes this bullish view? The key factor driving this valuation is a carefully crafted growth plan that extends beyond legacy contracts and considers next-generation defense breakthroughs. What financial levers are analysts watching to unlock this higher value? The answers can be found in their projections of profitability and cash flows. Explore the narrative further to better understand the details behind this valuation perspective.

Result: Fair Value of $487.16 (UNDERVALUED)

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

However, significant cost overruns on key programs or shifts in defense budgets could quickly undermine this bullish outlook for Lockheed Martin.

Find out about the key risks to this Lockheed Martin narrative.

Another View: SWS DCF Model

Taking a different approach, our DCF model also indicates that Lockheed Martin is undervalued. This fundamental method digs deeper into future cash flows and challenges you to ask which forecast best captures reality.

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 Lockheed Martin 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 Lockheed Martin Narrative

If you have a different perspective or enjoy conducting your own deep dive, the data is at your fingertips to construct your own narrative in just a few minutes. Do it your way.

A great starting point for your Lockheed Martin research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

Looking for more investment ideas?

Smart investors never stop at one opportunity. You could be missing out on tomorrow’s outperformers by sticking to the usual suspects. Start broadening your investment search today and see what else is out there with these powerful, targeted screens:

• Chase standout dividend yields as you strengthen your portfolio with companies offering dividend stocks with yields > 3% and dependable returns.
• Spot the next tech trendsetters by uncovering fast-moving businesses in artificial intelligence. Get the inside edge on AI penny stocks.
• Grab overlooked bargains before the crowd by hunting for undervalued stocks based on cash flows that could offer significant upside.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com