Is It Too Late To Consider L3Harris Technologies (LHX) After Its 82% One-Year Surge?

• If you are wondering whether L3Harris Technologies is priced fairly after its recent run, this article walks through how the current share price compares with a range of valuation checks.
• The stock last closed at US$356.14, with returns of 3.1% over the past 7 days, 17.0% year to date, 82.4% over 1 year, 80.6% over 3 years and 116.8% over 5 years. This naturally raises questions about how much of the story is already reflected in the price.
• Recent headlines around L3Harris have focused on its role as a major defense and aerospace contractor and its position in government and commercial programs. This helps frame how investors might think about its long term prospects and risk profile. These themes often influence how the market weighs future contract pipelines against balance sheet strength when pricing the shares.
• Simply Wall St currently gives L3Harris Technologies a valuation score of 2 out of 6. Next we will look at what that means across different valuation approaches, before considering an additional framework that can help you interpret value with more context by the end of the article.

L3Harris Technologies scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: L3Harris Technologies Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company might be worth today by projecting its future cash flows and then discounting those back to the present using a required return.

For L3Harris Technologies, the model used here is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month Free Cash Flow is about $2.66b. Simply Wall St then uses analyst inputs and its own extrapolations to project Free Cash Flow out over the next decade, including an estimate of $3.56b in 2030. These projections, all in $, are discounted to reflect the time value of money and risk.

On this basis, the DCF model suggests an intrinsic value of about $379.84 per share. Compared with the recent share price of $356.14, the output points to an implied 6.2% discount, which sits in a fairly modest range rather than at an extreme.

Result: ABOUT RIGHT

L3Harris Technologies is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for L3Harris Technologies.

Approach 2: L3Harris Technologies Price vs Earnings

For a profitable company like L3Harris Technologies, the P/E ratio is a useful yardstick because it links what you pay per share to the earnings the business is currently generating. In general, higher growth expectations and lower perceived risk can justify a higher P/E, while slower growth or higher risk tend to warrant a lower, more cautious multiple.

L3Harris is trading on a P/E of 41.42x. That sits below the Aerospace & Defense industry average of 43.68x and modestly above the peer average of 39.41x. Simply Wall St also calculates a proprietary “Fair Ratio” of 33.60x. This is the P/E level it estimates for L3Harris based on factors such as its earnings growth profile, industry, profit margins, market capitalization and risk characteristics.

This Fair Ratio can be more informative than a simple comparison with peers or the broad industry because it adjusts for company specific traits rather than assuming that all firms in the group deserve similar valuations. With the current P/E of 41.42x sitting above the Fair Ratio of 33.60x, this framework points to L3Harris trading on a richer multiple than that model would suggest.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your L3Harris Technologies Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St you can use Narratives on the Community page to link your view of L3Harris Technologies to a financial forecast and fair value that updates when new earnings, news or guidance arrives. For example, you might prefer a more optimistic story that leans toward the higher fair value estimate of about US$380.63, based on stronger revenue growth, higher margins and a richer future P/E multiple. Alternatively, you might adopt a more cautious story closer to the lower analyst price target of US$250.00, with softer growth and margin assumptions. You can then compare that Fair Value with the current share price to decide whether the stock looks attractive or stretched given your own assumptions.

Do you think there's more to the story for L3Harris Technologies? Head over to our Community to see what others are saying!

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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