Lockheed Martin (LMT) Valuation
A formula-driven DCF, defense-peer comparables cross-check, WACC-by-growth sensitivity analysis, and one-page investment memo. The Excel workbook is generated from Python and remains inspectable cell by cell.
Download the model View source
Illustrative student valuation, not investment advice.
NYSE: LMT
BUY- Target
- ~$560
- Upside
- ~13%
- Dividend
- ~2.7%
- Total return
- ~16%
- Beta
- ~0.6
Valuation map
Three methods triangulate fair value. The base and higher cases sit from roughly $560 to $606, while the exit-multiple case stays near the recent market price.
Method
The workbook starts from FY2025 financials and forecasts five years of revenue, EBIT, taxes, D&A, capex, and working capital. Unlevered free cash flow is discounted at a CAPM-based WACC of roughly 6.8 percent.
- DCF, two terminal methods
- Five-year unlevered FCF with a 2.25 percent Gordon-growth perpetuity and a 12x exit EV/EBITDA terminal value.
- Comparable companies
- EV/Revenue, EV/EBITDA, and P/E against RTX, Northrop Grumman, General Dynamics, and L3Harris, with Boeing excluded from the P/E median for negative earnings.
- Sensitivity
- A live WACC-by-terminal-growth grid shows how implied value moves with the model's two most sensitive assumptions.
Thesis
This is not a high-growth re-rating story. The thesis is an asymmetric, cash-generative compounder riding a multi-year global defense up-cycle.
Munitions demand and backlog
Elevated defense budgets and replenishment demand support low-cyclicality growth, with a backlog near 2x annual revenue.
F-35 sustainment
As the installed base grows, revenue shifts toward sustainment and modernization even when production flattens.
Cash returns
Free cash flow funds a growing dividend and buybacks that reduce the share count.
Key risks include appropriations delays, F-35 concentration, fixed-price development losses, and multiple compression.