Lockheed Martin Corp (LMT, Financial) experienced a daily loss of -4.77% and a 3-month loss of -6.92%, with an Earnings Per Share (EPS) of 27.35. The question on investors' minds is, is this stock fairly valued? This comprehensive analysis will delve into the valuation of Lockheed Martin Corp (LMT) to provide an informed answer. Let's dive in.
A Glimpse into Lockheed Martin Corp (LMT, Financial)
Lockheed Martin Corp (LMT) is the world's largest defense contractor, boasting a dominant position in the Western market for high-end fighter aircraft since its triumph in the F-35 Joint Strike Fighter program in 2001. Aeronautics, Lockheed Martin's largest segment, generates over two-thirds of its revenue from the F-35. Other segments include rotary and mission systems, primarily the Sikorsky helicopter business; missiles and fire control, which develops missiles and missile defense systems; and space systems, which manufactures satellites and receives equity income from the United Launch Alliance joint venture.
With a current stock price of $423.94 and a market cap of $106.80 billion, the question arises as to whether this aligns with Lockheed Martin's fair value, as estimated by the GF Value. To answer this, we'll need to delve deeper into the company's financials and intrinsic valuation.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, calculated based on three factors: historical trading multiples, GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally trade.
Lockheed Martin (LMT, Financial) is estimated to be fairly valued, according to GuruFocus Value calculation. At its current price of $423.94 per share and the market cap of $106.80 billion, Lockheed Martin stock is estimated to be fairly valued. This implies that the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength of Lockheed Martin
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. Lockheed Martin has a cash-to-debt ratio of 0.21, ranking worse than 71.53% of 288 companies in the Aerospace & Defense industry. However, its overall financial strength is 6 out of 10, indicating fair financial health.
Profitability and Growth of Lockheed Martin
Investing in profitable companies carries less risk, especially those demonstrating consistent profitability over the long term. Lockheed Martin has been profitable 10 years over the past 10 years, with revenues of $67.40 billion and Earnings Per Share (EPS) of $27.35 in the past 12 months. Its operating margin of 12.86% is better than 77.66% of 282 companies in the Aerospace & Defense industry. Overall, GuruFocus ranks Lockheed Martin's profitability as strong.
Growth is a significant factor in a company's valuation. The 3-year average annual revenue growth of Lockheed Martin is 5.8%, ranking better than 62.69% of 260 companies in the Aerospace & Defense industry. The 3-year average EBITDA growth rate is 0.9%, ranking better than 50% of 228 companies in the Aerospace & Defense industry.
ROIC vs WACC
Another profitability indicator is comparing a company's return on invested capital (ROIC) and the weighted cost of capital (WACC). Lockheed Martin's ROIC for the past 12 months is 16.26, and its WACC is 6.03. This indicates that the company generates a higher cash flow relative to the capital it has invested in its business.
Conclusion
Overall, Lockheed Martin (LMT, Financial) stock is estimated to be fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 50% of 228 companies in the Aerospace & Defense industry. For more information on Lockheed Martin stock, you can check out its 30-Year Financials here.
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