Lockheed Martin Corp (LMT, Financial) witnessed a daily gain of 8.06%, though it experienced a 3-month loss of -4.92%. The company's Earnings Per Share (EPS) stands at 27.35. But the question remains: Is the stock fairly valued?
In this analysis, we delve into Lockheed Martin's financial performance, focusing on its intrinsic value. We encourage you to read on for an insightful assessment of Lockheed Martin Corp (LMT, Financial).
About Lockheed Martin Corp (LMT, Financial)
Lockheed Martin Corp, the world's largest defense contractor, has dominated the Western market for high-end fighter aircraft since winning the F-35 Joint Strike Fighter program in 2001. The company's largest segment, aeronautics, generates upwards of two-thirds of its revenue from the F-35.
Lockheed Martin's remaining segments include rotary and mission systems (mainly the Sikorsky helicopter business), missiles and fire control (creating missiles and missile defense systems), and space systems (producing satellites and receiving equity income from the United Launch Alliance joint venture).
The company's stock price currently stands at $433.03, with a GF Value of $450.63, suggesting that the stock is fairly valued.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates.
The GF Value Line denotes the stock's ideal fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Lockheed Martin (LMT, Financial) is estimated to be fairly valued based on GuruFocus' valuation method. At its current price of $433.03 per share, Lockheed Martin stock is estimated to be fairly valued. Because Lockheed Martin is fairly valued, 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
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is crucial to carefully review a company's financial strength before deciding whether to buy its stock.
Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding a company's financial strength. Lockheed Martin has a cash-to-debt ratio of 0.21, which is worse than 71.33% of 293 companies in the Aerospace & Defense industry. GuruFocus ranks the overall financial strength of Lockheed Martin at 6 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those demonstrating consistent profitability over the long term, poses less risk. A company with high profit margins is also typically a safer investment than one with low profit margins. Lockheed Martin has been profitable 10 over the past 10 years.
Over the past twelve months, the company had a revenue of $67.40 billion and Earnings Per Share (EPS) of $27.35. Its operating margin is 12.86%, which ranks better than 75.51% of 294 companies in the Aerospace & Defense industry. Overall, GuruFocus ranks Lockheed Martin's profitability at 9 out of 10, indicating strong profitability.
Growth is probably the most important factor in a company's valuation. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Lockheed Martin is 5.8%, which ranks better than 61.74% of 264 companies in the Aerospace & Defense industry. The 3-year average EBITDA growth rate is 0.9%, which ranks worse than 50.43% of 230 companies in the Aerospace & Defense industry.
ROIC vs WACC
Another method of determining a company's profitability is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Lockheed Martin's return on invested capital is 16.26, and its cost of capital is 6.42.
Conclusion
In conclusion, the stock of Lockheed Martin (LMT, Financial) is estimated to be fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks worse than 50.43% of 230 companies in the Aerospace & Defense industry. To learn more about Lockheed Martin stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
