Elbit Systems (TASE:ESLT): Assessing Valuation After a Strong Share Price Rally

Elbit Systems (TASE:ESLT) has quietly kept its momentum, with the stock climbing about 9% over the past week and nearly doubling over the past year, drawing fresh attention to its valuation.

See our latest analysis for Elbit Systems.

That surge sits on top of an already strong run, with the share price now at ₪1,767.2 and a one year total shareholder return of about 89%. This suggests momentum is still building as investors reassess Elbit’s growth prospects and risk profile.

If Elbit’s run has you rethinking your defense exposure, it could be worth scanning other aerospace and defense stocks that might be earlier in their rerating journey.

With earnings growing faster than revenue but the share price already sitting within a few percent of analyst targets, investors now face a key question: is Elbit still undervalued or is future growth already priced in?

Price to earnings of 55.7x: Is it justified?

On a trailing basis, Elbit Systems trades at a price to earnings ratio of 55.7 times, which leaves the stock looking expensive relative to close peers at the current price of ₪1,767.2.

The price to earnings multiple compares the share price to the company’s earnings per share. This makes it a common way to gauge how much investors are willing to pay for each unit of current profit in the Aerospace and Defense sector.

In Elbit’s case, the 55.7 times multiple is described as good value against the broader Asian Aerospace and Defense industry average of 56.1 times. This hints that the market is pricing its earnings roughly in line with the wider regional group, even after a strong run.

However, that same 55.7 times multiple screens as expensive against a closer peer set average of 48.5 times. This suggests investors are assigning Elbit a premium relative to comparable companies and implies that expectations for future growth and execution are higher than for many of its direct rivals.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price to earnings of 55.7x (OVERVALUED)

However, stretched valuation and any slowdown in defense spending or contract awards could quickly challenge expectations baked into Elbit’s current share price.

Find out about the key risks to this Elbit Systems narrative.

Another angle on value

Our DCF model paints a harsher picture than the earnings multiple. At ₪1,767.2, Elbit trades well above our estimate of fair value at around ₪1,123, suggesting it could be overvalued on cash flow terms. Is the market overpaying for momentum and recent profit acceleration?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Elbit Systems for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 914 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Elbit Systems Narrative

If you see the story differently or want to test your own assumptions against the numbers, you can build a custom view in just a few minutes: Do it your way.

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Elbit Systems.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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