Lockheed Martin Corporation is an American aerospace, defense, arms, security, and advanced technologies company with worldwide interests. Lockheed Martin provides a broad range of products and services to the world’s governments and commercial customers. In 2019, the US government accounted for 71% of Lockheed Martin’s sales. This means that Lockheed Martin has a reliable customer, which is unlikely to default on its payments. This week, I fundamentally analyze Lockheed Martin’s stock. I review Lockheed Martin’s key ratios, derive the intrinsic value using Discounted Cash Flow (DCF) analysis, and look at expected rate of return from this investment. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
I review various key ratios such as Revenue, Net Income, Shares outstanding, Dividends, Payout Ratio, Free Cash Flows (FCF), Financial Leverage, Current Ratio, Debt to Equity Ratio, Return on Equity (ROE), Days Sales Outstanding (DSO), Days Inventory, Payable Period, Cash Conversion Cycle, Inventory Turnover, etc.
After taking into account 2019’s free cash flow of $5,827 million figure, a 3% growth rate of FCF (growth for the next 10 years), 10% discount rate, 2% long term growth rate (growth from 10 year mark to perpetuity), 282 million shares outstanding, and $11,404 million of long term debt, the DCF analysis yields us an intrinsic value of $233.89 per share. Using the current stock price of about $362 per share, and taking into the shares outstanding and future projects of free cash flows, we get the expected rate of return of 4.8%.
1:05 Key Ratios Analysis
12:39 Discounted Cash Flow Analysis / Intrinsic Value
14:24 Expected Rate of Return Calculation
15:25 Summary / Conclusion
Lockheed Martin’s Website: here
Morningstar Key Ratios Link: here.
Useful Resources here.
Lockheed Martin Corporation is an American aerospace, defense, arms, security, and advanced technologies company with worldwide interests. It was formed by the merger of Lockheed Corporation with Martin Marietta in March 1995. It is headquartered in North Bethesda, Maryland, in the Washington, D.C., area.
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