Intrinsic value of Lockheed Martin - LMT

Previous Close

$305.80

  Intrinsic Value

$203.89

stock screener

  Rating & Target

sell

-33%

  Value-price divergence*

+82%

Previous close

$305.80

 
Intrinsic value

$203.89

 
Up/down potential

-33%

 
Rating

sell

 
Value-price divergence*

+82%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of LMT stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 87.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  16.56
  6.60
  6.44
  6.30
  6.17
  6.05
  5.94
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.18
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
Revenue, $m
  47,248
  50,366
  53,610
  56,985
  60,499
  64,159
  67,973
  71,950
  76,098
  80,427
  84,947
  89,668
  94,602
  99,760
  105,153
  110,796
  116,701
  122,882
  129,354
  136,132
  143,233
  150,673
  158,470
  166,644
  175,212
  184,196
  193,618
  203,499
  213,863
  224,735
  236,141
Variable operating expenses, $m
 
  44,000
  46,764
  49,640
  52,635
  55,754
  59,005
  62,394
  65,929
  69,618
  73,470
  76,417
  80,622
  85,017
  89,614
  94,422
  99,454
  104,722
  110,237
  116,014
  122,066
  128,406
  135,051
  142,017
  149,319
  156,975
  165,005
  173,425
  182,258
  191,523
  201,244
Fixed operating expenses, $m
 
  361
  370
  379
  389
  398
  408
  418
  429
  440
  451
  462
  473
  485
  497
  510
  523
  536
  549
  563
  577
  591
  606
  621
  637
  653
  669
  686
  703
  720
  738
Total operating expenses, $m
  41,699
  44,361
  47,134
  50,019
  53,024
  56,152
  59,413
  62,812
  66,358
  70,058
  73,921
  76,879
  81,095
  85,502
  90,111
  94,932
  99,977
  105,258
  110,786
  116,577
  122,643
  128,997
  135,657
  142,638
  149,956
  157,628
  165,674
  174,111
  182,961
  192,243
  201,982
Operating income, $m
  5,549
  6,006
  6,476
  6,966
  7,476
  8,007
  8,561
  9,138
  9,741
  10,370
  11,027
  12,790
  13,507
  14,257
  15,042
  15,864
  16,724
  17,624
  18,567
  19,555
  20,590
  21,676
  22,813
  24,006
  25,257
  26,568
  27,944
  29,388
  30,902
  32,491
  34,159
EBITDA, $m
  6,764
  7,586
  8,089
  8,612
  9,157
  9,725
  10,317
  10,934
  11,578
  12,250
  12,953
  13,686
  14,453
  15,255
  16,094
  16,972
  17,891
  18,853
  19,861
  20,916
  22,023
  23,182
  24,398
  25,672
  27,009
  28,410
  29,880
  31,423
  33,041
  34,739
  36,521
Interest expense (income), $m
  0
  500
  485
  589
  696
  808
  925
  1,047
  1,173
  1,306
  1,444
  1,588
  1,738
  1,896
  2,060
  2,232
  2,412
  2,600
  2,797
  3,004
  3,220
  3,446
  3,683
  3,932
  4,193
  4,466
  4,752
  5,053
  5,368
  5,698
  6,045
Earnings before tax, $m
  4,886
  5,506
  5,991
  6,377
  6,779
  7,199
  7,636
  8,091
  8,567
  9,064
  9,583
  11,202
  11,769
  12,362
  12,982
  13,632
  14,312
  15,024
  15,770
  16,551
  17,371
  18,229
  19,130
  20,074
  21,064
  22,103
  23,192
  24,335
  25,535
  26,793
  28,114
Tax expense, $m
  1,133
  1,487
  1,618
  1,722
  1,830
  1,944
  2,062
  2,185
  2,313
  2,447
  2,587
  3,024
  3,178
  3,338
  3,505
  3,681
  3,864
  4,056
  4,258
  4,469
  4,690
  4,922
  5,165
  5,420
  5,687
  5,968
  6,262
  6,571
  6,894
  7,234
  7,591
Net income, $m
  5,302
  4,020
  4,373
  4,655
  4,949
  5,255
  5,574
  5,907
  6,254
  6,617
  6,996
  8,177
  8,591
  9,024
  9,477
  9,951
  10,448
  10,967
  11,512
  12,083
  12,681
  13,307
  13,965
  14,654
  15,377
  16,135
  16,930
  17,765
  18,640
  19,559
  20,524

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,837
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  47,806
  50,978
  54,261
  57,677
  61,234
  64,939
  68,799
  72,824
  77,022
  81,404
  85,979
  90,757
  95,751
  100,971
  106,430
  112,142
  118,118
  124,374
  130,925
  137,785
  144,972
  152,503
  160,395
  168,668
  177,340
  186,434
  195,969
  205,970
  216,461
  227,465
  239,010
Adjusted assets (=assets-cash), $m
  45,969
  50,978
  54,261
  57,677
  61,234
  64,939
  68,799
  72,824
  77,022
  81,404
  85,979
  90,757
  95,751
  100,971
  106,430
  112,142
  118,118
  124,374
  130,925
  137,785
  144,972
  152,503
  160,395
  168,668
  177,340
  186,434
  195,969
  205,970
  216,461
  227,465
  239,010
Revenue / Adjusted assets
  1.028
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
Average production assets, $m
  6,832
  7,303
  7,773
  8,263
  8,772
  9,303
  9,856
  10,433
  11,034
  11,662
  12,317
  13,002
  13,717
  14,465
  15,247
  16,065
  16,922
  17,818
  18,756
  19,739
  20,769
  21,848
  22,978
  24,163
  25,406
  26,708
  28,075
  29,507
  31,010
  32,587
  34,241
Working capital, $m
  2,566
  755
  804
  855
  907
  962
  1,020
  1,079
  1,141
  1,206
  1,274
  1,345
  1,419
  1,496
  1,577
  1,662
  1,751
  1,843
  1,940
  2,042
  2,148
  2,260
  2,377
  2,500
  2,628
  2,763
  2,904
  3,052
  3,208
  3,371
  3,542
Total debt, $m
  14,282
  13,867
  16,822
  19,897
  23,098
  26,432
  29,906
  33,529
  37,307
  41,251
  45,368
  49,669
  54,163
  58,861
  63,774
  68,914
  74,293
  79,924
  85,819
  91,994
  98,462
  105,240
  112,343
  119,788
  127,593
  135,777
  144,359
  153,360
  162,802
  172,705
  183,096
Total liabilities, $m
  46,295
  45,880
  48,835
  51,910
  55,111
  58,445
  61,919
  65,542
  69,320
  73,264
  77,381
  81,682
  86,176
  90,874
  95,787
  100,927
  106,306
  111,937
  117,832
  124,007
  130,475
  137,253
  144,356
  151,801
  159,606
  167,790
  176,372
  185,373
  194,815
  204,718
  215,109
Total equity, $m
  1,511
  5,098
  5,426
  5,768
  6,123
  6,494
  6,880
  7,282
  7,702
  8,140
  8,598
  9,076
  9,575
  10,097
  10,643
  11,214
  11,812
  12,437
  13,092
  13,779
  14,497
  15,250
  16,040
  16,867
  17,734
  18,643
  19,597
  20,597
  21,646
  22,746
  23,901
Total liabilities and equity, $m
  47,806
  50,978
  54,261
  57,678
  61,234
  64,939
  68,799
  72,824
  77,022
  81,404
  85,979
  90,758
  95,751
  100,971
  106,430
  112,141
  118,118
  124,374
  130,924
  137,786
  144,972
  152,503
  160,396
  168,668
  177,340
  186,433
  195,969
  205,970
  216,461
  227,464
  239,010
Debt-to-equity ratio
  9.452
  2.720
  3.100
  3.450
  3.770
  4.070
  4.350
  4.600
  4.840
  5.070
  5.280
  5.470
  5.660
  5.830
  5.990
  6.150
  6.290
  6.430
  6.550
  6.680
  6.790
  6.900
  7.000
  7.100
  7.190
  7.280
  7.370
  7.450
  7.520
  7.590
  7.660
Adjusted equity ratio
  -0.007
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5,302
  4,020
  4,373
  4,655
  4,949
  5,255
  5,574
  5,907
  6,254
  6,617
  6,996
  8,177
  8,591
  9,024
  9,477
  9,951
  10,448
  10,967
  11,512
  12,083
  12,681
  13,307
  13,965
  14,654
  15,377
  16,135
  16,930
  17,765
  18,640
  19,559
  20,524
Depreciation, amort., depletion, $m
  1,215
  1,580
  1,612
  1,646
  1,681
  1,718
  1,756
  1,796
  1,837
  1,881
  1,926
  897
  946
  998
  1,052
  1,108
  1,167
  1,229
  1,294
  1,361
  1,432
  1,507
  1,585
  1,666
  1,752
  1,842
  1,936
  2,035
  2,139
  2,247
  2,361
Funds from operations, $m
  5,111
  5,600
  5,986
  6,302
  6,630
  6,973
  7,330
  7,703
  8,091
  8,497
  8,921
  9,074
  9,537
  10,022
  10,529
  11,059
  11,615
  12,196
  12,805
  13,444
  14,113
  14,814
  15,549
  16,320
  17,129
  17,977
  18,866
  19,800
  20,779
  21,807
  22,885
Change in working capital, $m
  -78
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  117
  123
  129
  135
  141
  148
  155
  163
  171
Cash from operations, $m
  5,189
  5,553
  5,937
  6,251
  6,578
  6,918
  7,273
  7,643
  8,029
  8,432
  8,854
  9,003
  9,463
  9,944
  10,448
  10,974
  11,526
  12,103
  12,708
  13,342
  14,006
  14,703
  15,432
  16,198
  17,000
  17,842
  18,725
  19,651
  20,624
  21,643
  22,714
Maintenance CAPEX, $m
  0
  -471
  -504
  -536
  -570
  -605
  -642
  -680
  -720
  -761
  -804
  -849
  -897
  -946
  -998
  -1,052
  -1,108
  -1,167
  -1,229
  -1,294
  -1,361
  -1,432
  -1,507
  -1,585
  -1,666
  -1,752
  -1,842
  -1,936
  -2,035
  -2,139
  -2,247
New CAPEX, $m
  -1,063
  -471
  -470
  -489
  -510
  -531
  -553
  -577
  -601
  -628
  -655
  -685
  -715
  -748
  -782
  -818
  -856
  -896
  -938
  -983
  -1,030
  -1,079
  -1,131
  -1,185
  -1,242
  -1,303
  -1,366
  -1,433
  -1,503
  -1,576
  -1,654
Cash from investing activities, $m
  -985
  -942
  -974
  -1,025
  -1,080
  -1,136
  -1,195
  -1,257
  -1,321
  -1,389
  -1,459
  -1,534
  -1,612
  -1,694
  -1,780
  -1,870
  -1,964
  -2,063
  -2,167
  -2,277
  -2,391
  -2,511
  -2,638
  -2,770
  -2,908
  -3,055
  -3,208
  -3,369
  -3,538
  -3,715
  -3,901
Free cash flow, $m
  4,204
  4,610
  4,963
  5,225
  5,498
  5,782
  6,078
  6,387
  6,708
  7,044
  7,394
  7,469
  7,851
  8,250
  8,668
  9,105
  9,562
  10,040
  10,541
  11,066
  11,615
  12,191
  12,795
  13,428
  14,091
  14,787
  15,517
  16,283
  17,086
  17,928
  18,813
Issuance/(repayment) of debt, $m
  -952
  -415
  2,955
  3,075
  3,201
  3,334
  3,474
  3,622
  3,779
  3,943
  4,117
  4,301
  4,494
  4,698
  4,913
  5,140
  5,379
  5,630
  5,896
  6,175
  6,468
  6,778
  7,103
  7,445
  7,805
  8,184
  8,582
  9,001
  9,441
  9,904
  10,390
Issuance/(repurchase) of shares, $m
  -1,990
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,409
  -415
  2,955
  3,075
  3,201
  3,334
  3,474
  3,622
  3,779
  3,943
  4,117
  4,301
  4,494
  4,698
  4,913
  5,140
  5,379
  5,630
  5,896
  6,175
  6,468
  6,778
  7,103
  7,445
  7,805
  8,184
  8,582
  9,001
  9,441
  9,904
  10,390
Total cash flow (excl. dividends), $m
  2,795
  4,196
  7,918
  8,300
  8,699
  9,116
  9,553
  10,009
  10,487
  10,987
  11,511
  11,770
  12,345
  12,949
  13,581
  14,245
  14,941
  15,671
  16,437
  17,240
  18,084
  18,969
  19,898
  20,873
  21,897
  22,971
  24,099
  25,284
  26,527
  27,832
  29,203
Retained Cash Flow (-), $m
  1,586
  -3,587
  -328
  -342
  -356
  -370
  -386
  -402
  -420
  -438
  -457
  -478
  -499
  -522
  -546
  -571
  -598
  -626
  -655
  -686
  -719
  -753
  -789
  -827
  -867
  -909
  -954
  -1,000
  -1,049
  -1,100
  -1,154
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  609
  7,590
  7,958
  8,344
  8,746
  9,167
  9,607
  10,067
  10,549
  11,054
  11,292
  11,846
  12,427
  13,035
  13,674
  14,343
  15,045
  15,782
  16,554
  17,365
  18,216
  19,109
  20,046
  21,029
  22,062
  23,146
  24,283
  25,478
  26,732
  28,048
Discount rate, %
 
  8.50
  8.93
  9.37
  9.84
  10.33
  10.85
  11.39
  11.96
  12.56
  13.19
  13.85
  14.54
  15.26
  16.03
  16.83
  17.67
  18.55
  19.48
  20.46
  21.48
  22.55
  23.68
  24.86
  26.11
  27.41
  28.78
  30.22
  31.73
  33.32
  34.99
PV of cash for distribution, $m
 
  561
  6,397
  6,083
  5,732
  5,349
  4,941
  4,515
  4,077
  3,638
  3,203
  2,712
  2,324
  1,960
  1,626
  1,326
  1,062
  833
  641
  482
  355
  254
  178
  121
  80
  52
  32
  19
  11
  6
  3
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Lockheed Martin Corporation, a security and aerospace company, engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide. It operates through four segments: Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space Systems. The Aeronautics segment offers combat and air mobility aircrafts, unmanned air vehicles, and related technologies. The Missiles and Fire Control segment provides air and missile defense systems; tactical missiles and air-to-ground precision strike weapon systems; logistics; fire control systems; mission operations support, readiness, engineering support, and integration services; manned and unmanned ground vehicles; and energy management solutions. The Rotary and Mission Systems segment offers military and civil helicopters; ship and submarine mission and combat systems; mission systems and sensors for rotary and fixed-wing aircrafts; sea and land-based missile defense systems; radar systems; Littoral combat ships; simulation and training services; and unmanned systems and technologies. It also supports government customers in cybersecurity; and delivers communications, and command and control capabilities through mission solutions for defense applications. In addition, this segment provides military and commercial helicopters; and aftermarket service and support solutions to commercial and military customers. The Space Systems segment offers satellites, strategic and defensive missile systems, and space transportation systems; and classified systems and services in support of national security systems. Lockheed Martin Corporation was founded in 1909 and is headquartered in Bethesda, Maryland.

FINANCIAL RATIOS  of  Lockheed Martin (LMT)

Valuation Ratios
P/E Ratio 16.7
Price to Sales 1.9
Price to Book 58.5
Price to Tangible Book
Price to Cash Flow 17
Price to Free Cash Flow 21.4
Growth Rates
Sales Growth Rate 16.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 13.2%
Cap. Spend. - 3 Yr. Gr. Rate 4.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 945.2%
Total Debt to Equity 945.2%
Interest Coverage 0
Management Effectiveness
Return On Assets 10.9%
Ret/ On Assets - 3 Yr. Avg. 9.7%
Return On Total Capital 31.1%
Ret/ On T. Cap. - 3 Yr. Avg. 30.7%
Return On Equity 230.1%
Return On Equity - 3 Yr. Avg. 142.7%
Asset Turnover 1
Profitability Ratios
Gross Margin 10.7%
Gross Margin - 3 Yr. Avg. 11.3%
EBITDA Margin 12.9%
EBITDA Margin - 3 Yr. Avg. 13.4%
Operating Margin 11.7%
Oper. Margin - 3 Yr. Avg. 12%
Pre-Tax Margin 10.3%
Pre-Tax Margin - 3 Yr. Avg. 10.9%
Net Profit Margin 11.2%
Net Profit Margin - 3 Yr. Avg. 9.7%
Effective Tax Rate 23.2%
Eff/ Tax Rate - 3 Yr. Avg. 27%
Payout Ratio 38.6%

LMT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LMT stock intrinsic value calculation we used $47248 million for the last fiscal year's total revenue generated by Lockheed Martin. The default revenue input number comes from 2016 income statement of Lockheed Martin. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our LMT stock valuation model: a) initial revenue growth rate of 6.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 8.5%, whose default value for LMT is calculated based on our internal credit rating of Lockheed Martin, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Lockheed Martin.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of LMT stock the variable cost ratio is equal to 87.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $352 million in the base year in the intrinsic value calculation for LMT stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Lockheed Martin.

Corporate tax rate of 27% is the nominal tax rate for Lockheed Martin. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the LMT stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for LMT are equal to 14.5%.

Life of production assets of 14.5 years is the average useful life of capital assets used in Lockheed Martin operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for LMT is equal to 1.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1511 million for Lockheed Martin - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 287.316 million for Lockheed Martin is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Lockheed Martin at the current share price and the inputted number of shares is $87.9 billion.

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COMPANY NEWS

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▶ Lockheed, 3 other defense firms score contracts worth $511M   [Aug-03-17 02:25PM  American City Business Journals]
▶ 6 Most Important Things in Business Today   [05:09AM  24/7 Wall St.]
▶ Lockheed Martin begins building $350 million satellite facility in Jeffco   [Aug-02-17 03:38PM  American City Business Journals]
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▶ Lockheed, Northrop, DRS land 6 contracts with $4.1B in local work   [Jul-31-17 03:50PM  American City Business Journals]
▶ Lockheed Martin Gets $3.7 Billion Payday on F-35s   [Jul-29-17 10:05AM  24/7 Wall St.]
▶ What Lockheed's Secretive Skunk Works Unit Sees For The 6th-Gen. Fighter   [Jul-26-17 05:33PM  Investor's Business Daily]
▶ Fighter jets and missiles: Lockheed Martin lands 2 contracts for $94.5M   [12:10PM  American City Business Journals]
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Stock chart of LMT Financial statements of LMT
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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