Lockheed Martin currently trades at $481.80 per share and has shown little upside over the past six months, posting a middling return of 4.3%. This is close to the S&P 500’s 7% gain during that period.
Is now the time to buy Lockheed Martin, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.We don't have much confidence in Lockheed Martin. Here are three reasons why we avoid LMT and a stock we'd rather own.
Why Is Lockheed Martin Not Exciting?
Headquartered in Maryland, Famous for the F-35 aircraft, Lockheed Martin (NYSE:LMT) specializes in defense, space, homeland security, and information technology products.
1. Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Regrettably, Lockheed Martin’s sales grew at a sluggish 4.1% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector. 
2. Slow Organic Growth Suggests Waning Demand In Core Business
Investors interested in Defense Contractors companies should track organic revenue in addition to reported revenue. This metric gives visibility into Lockheed Martin’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Lockheed Martin’s organic revenue averaged 5.1% year-on-year growth. This performance was underwhelming and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations. 
3. New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
We typically prefer to invest in companies with high returns because it means they have viable business models, but the trend in a company’s ROIC is often what surprises the market and moves the stock price. Lockheed Martin’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
Lockheed Martin isn’t a terrible business, but it isn’t one of our picks. That said, the stock currently trades at 17.6× forward price-to-earnings (or $481.80 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere. We’d recommend looking at FTAI Aviation, an aerospace company benefiting from Boeing and Airbus’s struggles.
Stocks We Like More Than Lockheed Martin
The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market to cap off the year - and we’re zeroing in on the stocks that could benefit immensely.
Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,691% between September 2019 and September 2024) as well as under-the-radar businesses like Comfort Systems (+783% five-year return). Find your next big winner with StockStory today for free.
