As of October 30, 2021.
Here’s a new entry into the valuation series. Although the market is near all time highs, there are still values out there if you know how to look.
Remember to do your own due diligence and make sure the stock fits your risk tolerance and asset allocation.
Today’s stock is Lockheed Martin – ticker symbol LMT
Lockheed Martin Corporation is an American aerospace, arms, defense, security, and advanced technologies company.
https://www.lockheedmartin.com/en-us/products.html
Some metrics I look for –
Safety:
Dividend Safety Score – 84 – out of 99
Current Ratio (look for a number higher than 1, higher the better) – 1.4
Debt to Equity (lower the better) – 1.21
Payout Ratio – 47.80%
Estimated Earnings Growth Rate – 5 year – 4.35%
Dividend history:
Years of dividend increases: 19
Dividend growth rate – 5 year – 9.52%
Current yield: 3.37%
Valuation:
DCF model: $298.53
P/E Mean Reversion: $354.52
Dividend Yield Theory: $440.94
Average of the three valuations – $364.66
Analyst’s 1 year estimate- $398.44
Current price: $332.32
Potential discount – 8.86%
Commentary: LMT is the world’s largest defense contractor. They secure contracts with government agencies throughout the world and the contracts are sometimes decades long. The long term nature of the business as well as increased needs for military and space related products leads to a very sustainable business model. The valuation is average but the quality and potential upside to the share price is intriguing, especially when compared to the overall market. The recent withdrawal of American forces from Afghanistan has created some uncertainty in the market regarding the growth of LMT, but the long term contracts that the company signs as well as continued technological updates, geopolitical tension, and need for refreshment of existing military systems will provide a long runway for LMT.
Disclosure: I own shares of LMT