3 Reasons to Avoid LMT and 1 Stock to Buy Instead

Core Viewpoint - Lockheed Martin has experienced a slight decline of 0.7% in stock price over the past six months, underperforming the S&P 500's 19.5% gain, raising questions about potential investment opportunities or risks [1]. Group 1: Backlog and Demand - Lockheed Martin's backlog stands at $179.1 billion, with a year-on-year growth average of 6.8% over the last two years, indicating soft demand and challenges in securing new orders compared to sector performance [4]. - The importance of tracking backlog is emphasized as it reflects the value of outstanding orders, providing insight into future revenue streams for defense contractors [3]. Group 2: Earnings Performance - The company's earnings per share (EPS) has declined by 5.2% annually over the last five years, despite a revenue growth of 2.7%, suggesting reduced profitability on a per-share basis [5]. - This trend indicates that while revenue has increased, the company has become less efficient in generating profit from its sales [5]. Group 3: Return on Invested Capital (ROIC) - Lockheed Martin's return on invested capital (ROIC) has significantly decreased in recent years, raising concerns about the company's ability to generate operating profit relative to its capital raised [6][7]. - The declining ROIC may reflect fewer profitable growth opportunities, which could impact future stock performance [7]. Group 4: Investment Outlook - The stock currently trades at a forward price-to-earnings (P/E) ratio of 17, valued at $468.11 per share, which is considered fair but lacks significant upside potential compared to the risks involved [8]. - Analysts suggest that there are better investment opportunities available in the market at this time [8][9].