Is RTX Fairly Priced After Defense Contract Announcements and a 46% Rally in 2025?

• Wondering if RTX is really worth its price tag right now? You are not alone, with investors watching closely for signs of opportunity or warning.
• The stock has seen notable swings lately. It dropped 3.4% over the past week and 5.0% in the last month, while surging an impressive 46.3% year-to-date and 43.1% over the past year.
• RTX has recently made headlines with its cutting-edge defense contracts and renewed focus on innovation. This has caught the attention of both Wall Street and industry watchers. News about pivotal military partnerships and strategic technology advancements has further fueled the conversation.
• Currently, RTX earns a valuation score of 3 out of 6. This means it is considered undervalued on half of the key checks. Let us break down the different ways this valuation comes together to help you take a smarter approach that might give you a clearer picture by the end of this article.

RTX delivered 43.1% returns over the last year. See how this stacks up to the rest of the Aerospace & Defense industry.

Approach 1: RTX Discounted Cash Flow (DCF) Analysis

The 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 helps investors gauge whether a stock is attractively priced based on expected business performance instead of recent market excitement.

For RTX, the current Free Cash Flow stands at $4.47 Billion, providing a solid foundation for forecasting. Analyst estimates indicate Free Cash Flow could increase to $10.77 Billion by 2029, and further projections point even higher over the next decade. The initial five years are based on analyst consensus, while longer-term numbers are extrapolated by Simply Wall St. Together, these offer a comprehensive vision of future cash growth potential for RTX.

According to this DCF model, RTX has an estimated intrinsic value of $151.19 per share. However, the model shows the current price is approximately 12.2% above this fair value, so RTX appears overvalued based on discounted cash flow analysis at this time.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests RTX may be overvalued by 12.2%. Discover 923 undervalued stocks or create your own screener to find better value opportunities.

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

Approach 2: RTX Price vs Earnings

The Price-to-Earnings (PE) ratio is widely used for valuing profitable companies such as RTX because it directly reflects how much investors are willing to pay today for a dollar of earnings. This metric helps investors quickly compare a company's current valuation against its own history, industry peers, or the broader market.

Deciding what counts as a “normal” or “fair” PE ratio depends on factors like how fast a company is expected to grow, its risk profile, and its profitability. Typically, higher growth prospects or lower risks justify a higher PE, while riskier or slower-growing businesses often deserve a lower one.

RTX currently trades at a PE ratio of 34.51x. That is in line with both the peer average of 34.90x and not far below the Aerospace & Defense industry average of 36.08x. While these benchmarks are helpful, they do not give the full picture for RTX specifically. This is where Simply Wall St’s "Fair Ratio" comes in, offering a more customized perspective.

The Fair Ratio for RTX is 34.78x. This proprietary metric goes beyond simple averages by factoring in RTX’s expected earnings growth, its profit margin, market capitalization, risk factors, and specific industry dynamics. It offers a more tailored and precise sense of whether the current valuation is justified for RTX as an individual business.

Comparing the actual PE ratio of 34.51x with the Fair Ratio of 34.78x, RTX appears to be valued at just about the right level on an earnings basis.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1424 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your RTX Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a straightforward tool that lets you attach your story or expectations for RTX, such as your own estimates of future revenue, profit margins, or fair value, to its financial forecast. This creates a bridge from what you believe about the company right through to what you think it is worth.

Narratives make investing more accessible by showing how your personal view of the business leads directly to your version of fair value. Available right on Simply Wall St’s Community page, Narratives are already being used by millions of investors to bring clarity and objectivity to their decisions on when to buy or sell. Whenever news breaks or earnings are updated, your Narrative adjusts dynamically, so you always see an up-to-date estimate based on the latest data, not just last quarter’s numbers.

For example, when it comes to RTX, some investors using Narratives expect significant upside if defense spending and aerospace growth trends persist, projecting a fair value as high as $192.06, while others remain more cautious due to risks like engine cost overruns or shifting defense policies, seeing fair value as low as $134.00. Narratives empower you to make your own call, with the numbers and the story both in one place.

Do you think there's more to the story for RTX? Head over to our Community to see what others are saying!

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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