L3Harris Trades Above Fair Value; Downside Risk Now Apparent
By stockpickr AI | March 3, 2026 | 10 min read
Investment Summary
L3Harris Technologies (Industrials) appears slightly overvalued based on a DCF analysis suggesting a fair value lower than its current market price.
Investment Recommendation
Hold
Fair Value: $228.75
Current Price: $235.40
Upside/Downside: -2.82%
The DCF analysis yields an implied fair value per share marginally below the current market price of $235.40. While the defense fundamentals are strong, the current valuation suggests limited immediate upside at this price point.
Key Metrics
- Market Cap: $44.99B
- P/E Ratio: 34.01x
- Forward P/E: 19.85x
- Revenue Growth (YoY): 4.29%
- Net Margin: 8.38%
- ROE: 11.40%
- Debt/Equity: 0.47
- Dividend Yield: 1.59%
Strengths
- Strong backlog: As of the latest filings, the company maintains a substantial order backlog, providing revenue visibility into the medium term.
- High-growth technology diversification: Significant exposure to growing defense tech segments like electronic warfare and secure communications (C5ISR).
- Solid profitability: Maintained a robust net profit margin around 8-9% despite macroeconomic pressures.
- Significant scale in the defense sector, positioning it as a prime contractor for major programs.
Risk Factors
- Program execution risks: Delays or cost overruns on large, complex government contracts can impact profitability.
- Government budget dependence: A significant portion of revenue is tied directly to discretionary US and international defense spending, subject to political shifts.
- Integration challenges: Ongoing integration risks associated with past large acquisitions impacting internal synergy realization.