LMT

Based on the comprehensive analysis of Lockheed Martin (LMT), the stock presents a compelling case for investment, with its strengths significantly outweighing its cautionary points.

LMT exhibits exceptionally strong technical momentum, trading near all-time highs while maintaining a remarkably low beta, suggesting stability amid its ascent. Fundamentally, its recent quarterly surge in profitability and impressive 26% ROE demonstrate highly efficient operations and pricing power. The valuation, while appearing rich on trailing metrics, becomes attractive when considering growth; a forward P/E of 17.6 and a remarkably low PEG ratio of 0.05 signal that the stock is undervalued relative to its future earnings potential.

Ultimately, LMT's defensive characteristics—including low volatility, stable government contracts, and insulation from broad market swings—combine with robust fundamentals and growth expectations to create a high-conviction opportunity. Therefore, LMT is considered a BUY for investors seeking a high-quality, lower-risk holding with strong growth prospects in the defense sector.

*Note: This is not investment advice, for reference only.*

RockFlow Model Forecast: Three Scenarios for 2026

Based on a 12-month outlook for Lockheed Martin (LMT), the stock is positioned for steady performance, supported by its strong fundamentals and defensive nature.

Key catalysts will likely include continued global demand for defense spending, particularly for its F-35 program and hypersonic weapons development, alongside the predictable revenue stream from its extensive backlog of government contracts. Potential risks primarily involve any unexpected shifts in U.S. or allied defense budgets and execution challenges on complex, next-generation programs. While a specific analyst target is not provided, the combination of a low PEG ratio and defensive profile suggests the potential for moderate upside from the current price of $558.3.

Wall Street Consensus

Most Wall Street analysts are optimistic about LMT's 12-month outlook, with consensus target around $572.70, indicating expected upside potential.

Overall, LMT has investment potential but also faces challenges. Here are key factors to weigh before investing.

LMT has demonstrated exceptionally strong momentum, significantly outperforming the market over recent months. The stock is currently navigating its 52-week high territory, reflecting sustained bullish investor sentiment.

Over the past one and three months, LMT has delivered impressive gains of 17.57% and 9.95%, respectively, substantially outperforming the broader market by 6.58%. This robust short-term performance, combined with its low beta of 0.245, indicates strong upside momentum with significantly lower volatility than the market.

The current price of $558.3 places LMT near the upper boundary of its 52-week range, just 0.9% below its all-time high of $563.28. While this suggests the stock is not technically overbought, its proximity to the peak warrants caution, especially considering its substantial rally and the 18.87% maximum drawdown witnessed in the past year.

Of course. Here is a fundamental analysis of Lockheed Martin (LMT) based on the provided data.

**1. Revenue & Profitability**

Lockheed Martin demonstrated a significant improvement in profitability in Q3 2025 compared to Q2 FY2025. Q3 revenue was $18.61 billion with a strong operating income margin of 12.25% and a net income margin of 8.70%, a substantial increase from Q2's net margin of 1.88%. This indicates much stronger operational execution and cost control in the most recent quarter, leading to diluted EPS of $6.95 compared to $1.46 in the prior quarter.

**2. Financial Health**

The company's financial health is solid but carries a significant debt load. The debt-to-equity ratio is high at 3.59, indicating a leveraged capital structure heavily reliant on debt financing. However, this is mitigated by a strong interest coverage ratio of nearly 8, meaning the company generates ample operating income to comfortably cover its interest expenses. The cash flow-to-debt ratio of 0.17 suggests that generating enough cash to pay down debt quickly could be a longer-term process.

**3. Operational Efficiency**

Operational efficiency is a key strength for Lockheed Martin. The company posted a robust Return on Equity (ROE) of 26.19% for Q3, which is impressive and indicates highly effective use of shareholder equity. The asset turnover ratio of 0.31 suggests that the company is less focused on asset-intensive efficiency and more on high-margin returns, which is typical for a defense contractor with large, long-term contracts. The strong ROE, coupled with the improved profit margins, points to efficient operations and pricing power within its markets.

Valuation Level: LMT's trailing PE of 24.1 appears elevated compared to typical market valuations, and this is further amplified by extremely high multiples for PB (20.6) and EV/EBITDA (50.1), which are unusual for most industrial companies. However, the significantly lower forward PE of 17.6 suggests strong earnings growth expectations, a view strongly supported by the remarkably low PEG ratio of 0.05, which traditionally indicates significant undervaluation based on growth prospects. The moderate PS ratio of 1.8 provides some balance to this mixed picture, making the overall valuation context-dependent on whether one prioritizes current multiples or future growth potential.

Peer Comparison: Without specific industry average data for comparison, a definitive peer assessment cannot be made regarding whether these multiples are typical for the aerospace and defense sector. Generally, defense contractors often trade at premium valuations due to their stable government contracts and high barriers to entry, which could justify elevated PB and EV/EBITDA ratios. The critical factor for investors would be comparing these metrics against direct competitors like RTX, Northrop Grumman, and General Dynamics to determine LMT's relative valuation position within its specialized industry.

Based on its Beta of 0.245, LMT exhibits extremely low volatility risk relative to the broader market, suggesting its price is largely insulated from broad market swings. The 1-year maximum drawdown of -18.87% is moderate for an individual stock, indicating that while not immune to downturns, its defensive profile has historically limited severe losses.

LMT faces minimal pressure from short sellers, as indicated by the absence of reported short interest; this reflects strong market confidence in its stability. Liquidity risk is exceptionally low given its status as a large-cap, blue-chip defense contractor with high trading volumes, though it remains exposed to government budget cycles and geopolitical policy shifts.