How Does General Dynamics’ 2025 Valuation Stack Up After a 28.7% Year to Date Surge?

• If you are wondering whether General Dynamics is still worth buying after its huge run, or if the smart money has already moved on, you are not alone in trying to pin down what a fair price really looks like here.
• Even after a slight pullback of 1.5% over the last week and 2.6% over the last month, the stock is still up 28.7% year to date and 23.5% over the past year, with a 144.5% gain over five years highlighting how powerful the long term story has been.
• Those moves sit against a backdrop of steady contract wins across defense, aerospace, and marine systems, as governments continue to prioritize spending on submarines, armored vehicles, and advanced communications. At the same time, the business jet segment has been benefiting from resilient private aviation demand and a healthy order backlog, helping support sentiment even when the broader market wobbles.
• Right now, General Dynamics scores a 4 out of 6 on our undervaluation checks, suggesting there may still be some value on the table. We will walk through those valuation methods next, then finish with a more intuitive way to make sense of what the market might be missing.

Find out why General Dynamics's 23.5% return over the last year is lagging behind its peers.

Approach 1: General Dynamics Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company is worth by projecting the cash it can generate in the future and then discounting those cash flows back to today in dollar terms.

For General Dynamics, the latest twelve month Free Cash Flow is about $4.6 billion, and analysts expect this to rise gradually over time. Based on a 2 Stage Free Cash Flow to Equity model, near term forecasts through 2029 are combined with longer term projections that Simply Wall St extrapolates out to 2035, with FCF expected to exceed $5.9 billion by then.

When all those projected cash flows are discounted back to today, the model arrives at an estimated intrinsic value of roughly $356.75 per share. That implies the stock is trading at about a 5.9% discount to its calculated fair value, suggesting the current price is a little below what the cash flow profile would justify, but not dramatically mispriced.

Result: ABOUT RIGHT

General Dynamics 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 General Dynamics.

Approach 2: General Dynamics Price vs Earnings

For established, profitable companies like General Dynamics, the price to earnings, or PE, ratio is often the most intuitive way to think about valuation because it directly compares what investors are paying with what the business is actually earning today.

What counts as a normal or fair PE depends on how fast earnings are expected to grow and how risky those earnings are, with higher growth and lower risk usually justifying higher multiples. General Dynamics currently trades on a PE of about 21.5x, which is meaningfully below the Aerospace and Defense industry average of roughly 37.6x and also below the peer group average of around 34.7x. Simply Wall St goes a step further by estimating a Fair Ratio of 27.4x, a proprietary view of what PE the company should trade on when you factor in its earnings growth outlook, profit margins, market cap, industry position, and risk profile. This tailored benchmark is more useful than a blunt comparison with sector averages because it reflects General Dynamics specific strengths and vulnerabilities. Set against that Fair Ratio, the current 21.5x multiple suggests the market is still applying a discount.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your General Dynamics Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework that lets you spell out your story about General Dynamics future, translate that story into assumptions for revenue, earnings and margins, and then connect those assumptions to a fair value you can compare with today’s share price. On Simply Wall St’s Community page, Narratives are used by millions of investors to tie a company’s qualitative drivers, like rising defense demand or execution risks in marine programs, directly to a financial forecast that updates dynamically as new information, such as earnings reports or news about contract wins, comes in. This makes it much easier to decide when to buy or sell, because you can see at a glance whether your Narrative fair value is above or below the current price and how that compares with other investors, from those who think General Dynamics is worth closer to the high end of recent targets, thanks to record backlog and margin expansion, to those who see downside risk toward the low end because of execution challenges, capital intensity, or contract volatility.

Do you think there's more to the story for General Dynamics? 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.