Is The Market Underpricing Lockheed Martin Stock?
Shares of Lockheed Martin (LMT) have fallen 19.6% over the past six months, trailing a 15.7% gain for the S&P 500. That decline leaves the stock trading at 18.2 times trailing earnings, a multiple that sits below the 20.7 average it held at quarter-ends over the past three years. Yet management used its fiscal Q2 2026 call to report a record backlog and raise the company’s outlook for the year. So is Lockheed worth more than the market is paying for it today?
What Would Lockheed Stock Be Worth In Three Years?
An arithmetic scenario, rather than a formal forecast, suggests Lockheed Martin stock would be worth 30.1% more in three years. Achieving this return assumes revenue grows 9.0% a year. That pace is a quarter faster than the 7.2% growth the company posted in the twelve months to fiscal Q2 2026. The model also assumes the net margin remains near today’s level and the P/E does not move. The following table compares current figures against the scenario’s projections.
| Today | In three years (scenario) | |
|---|---|---|
| Revenue | $77.0 billion | $99.7 billion |
| Net margin | 8.2% | 8.2% |
| Earnings | $6.3 billion | $8.2 billion |
| P/E | 18.2 | 18.2 |
| Share price | $499.22 | $649.26 |
Nearly all of the projected gain, or 98%, relies on Lockheed selling more, while none of it requires a higher P/E. Investors would not need to pay a premium for each dollar of profit, because the company would simply be earning more dollars. During the fiscal Q2 2026 call, management noted that growth was driven mainly by accelerating munition programs in Missiles and Fire Control. F-35 production also contributed to the top line. Sales in that missile segment climbed 19% in fiscal Q2 2026 from a year earlier.
Lockheed Martin Has To Keep Turning Orders Into Deliveries
Customer demand is not the issue. The company’s backlog hit an all-time high of $230 billion in fiscal Q2 2026, expanding by roughly $64 billion from a year earlier. In late June, the Missile Defense Agency awarded Lockheed a seven-year, $35 billion contract to quadruple production of an interceptor missile.
Yet a backlog only translates into revenue when factories actually build more. On the fiscal Q2 2026 call, management said Lockheed is delivering more of 10 of its munitions in 2026, alongside increased volumes of F-16s and C-130s. Still, management’s fiscal 2026 guide targets 7.6% sales growth. That rate sits a little below the scenario’s pace and only covers one year rather than three.
Lockheed Stock’s Return In Other Scenarios
The table below illustrates how the stock’s three-year return shifts when a single assumption changes while the others remain constant.
| If instead | Three-year upside |
|---|---|
| Nothing changes (the scenario) | 30.1% |
| Revenue grows two points a year slower | 23.0% |
| The margin returns to its three-year average | 31.4% |
| The P/E stays where it is today | 30.1% |
| Five years at the same pace instead of three | 54.5% |
| The next fiscal year grows at management’s guided pace | 28.4% |
The stock’s upside is most exposed to revenue growth. The scenario’s 9.0% pace is faster than anything Lockheed managed in any of the last three twelve-month periods. Prior to the latest period, sales grew 1.1% in the twelve months to fiscal Q2 2025 and 5.5% in the twelve months to fiscal Q2 2024.
Sales growth also dictates the nearest break-even point. Annual growth would have to fall to minus 0.1% a year, dropping 7.3 points below the past twelve months’ pace, for a three-year investment in the stock to return nothing. Lockheed’s revenue rose in each of its last three full fiscal years, climbing by 2.4% in the slowest of them.
The main source of potential gain and the nearest path to zero returns ultimately rely on the same metric. It all comes down to how fast Lockheed turns its backlog into sales. The investment case stays intact as long as the company’s missile plants deliver more each year. Investors will get their next look at those figures on or around October 22, 2026. If sales growth falls well short of the pace management guided for fiscal 2026, it would indicate that orders are taking longer to become deliveries. Under those conditions, Lockheed would become a riskier bet on a backlog it has yet to deliver.
How To Act On LMT?
Now you know LMT better. And that’s our purpose: to make you informed before you invest your money. However, making a bet on a single stock carries its own risks.
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