Rocket Lab (RKLB) Stock May Be 44% Undervalued Despite NASA Contract Loss
Rocket Lab has delivered a very large 3 year gain, yet today investors face a split verdict on whether the current share price lines up with underlying value. The Discounted Cash Flow (DCF) intrinsic value estimate points to a sizeable valuation gap, while market based multiples lean the other way.
- Rocket Lab has returned roughly 11x over 3 years, which puts extra pressure on any valuation case to be grounded in cash flow and execution rather than momentum.
- Winning hypersonic test work and expanding the space systems portfolio can support the intrinsic value case, while losing out on large missions such as NASA’s recent Mars orbiter award to Blue Origin highlights competitive risk that may cap how much investors are willing to pay.
- The broader checks are mixed rather than one sided, with the stock screening as a 3 out of 6 on value tests, and with the DCF framework suggesting undervaluation but market multiples pointing to an expensive profile.
The issue now is whether Rocket Lab’s current price better reflects the DCF style intrinsic value estimate or the richer picture implied by market multiples.
Scan hand picked peers that blend strong cash flow support with hyped share moves similar to Rocket Lab’s run using 49 high quality undervalued stocks.
Is Rocket Lab Still Cheap on Cash Flow?
Discounted Cash Flow models look at the cash Rocket Lab can generate in the future and pull it back to today’s dollars. Rocket Lab is still burning cash, with latest twelve month free cash flow at a loss of about $370.5 million, so the model places significant weight on a transition toward positive and growing free cash flow over time rather than steady current profits.
Based on those projections, the DCF framework arrives at an intrinsic value of about $117 per share. This sits above the current price and indicates the stock appears roughly 43.9% undervalued on this basis. NASA’s decision to award the Mars orbiter contract to Blue Origin illustrates competitive pressure in launch and deep space work, which helps explain why the market has been slower to price Rocket Lab closer to this cash flow driven estimate.
On this Discounted Cash Flow view, Rocket Lab appears undervalued relative to what its projected cash generation supports.
Our Discounted Cash Flow (DCF) analysis suggests Rocket Lab is undervalued by 43.9%. Track this in your watchlist or portfolio, or discover 49 more high quality undervalued stocks.
Is Rocket Lab Getting Expensive on Book Value?
P/B suits Rocket Lab because the business is still loss making, so the balance sheet gives a cleaner anchor than earnings based ratios like P/E.
On this lens, the stock trades at a P/B of about 11.3x. The broader Aerospace & Defense group sits closer to 3.1x, while Rocket Lab’s peer set clusters higher around 18.1x. That leaves the shares well above the sector norm but below the more speculative peer cohort that investors often use as a reference for high growth, cash burning space hardware companies.
Given that backdrop, the market is already attaching a rich premium to Rocket Lab’s equity base relative to the average defense contractor, even if it is not at the top end of the peer range.
On balance, Rocket Lab currently trades at a high P/B multiple, with investors paying a steep price relative to the industry’s typical book value levels.
See what the numbers say about this price — find out in our valuation breakdown.
The Rocket Lab Narrative: What Would Justify Today's Price?
Rocket Lab’s rally leaves a clear question for you as an investor. What would need to happen next on growth, margins and earnings for today’s price to look either conservative or stretched? Simply Wall St Narratives sit on the Community page and turn that puzzle into explicit sets of assumptions. Rather than only relying on one multiple or a single model line, each narrative lays out its fair value inputs so you can later compare them with actual results.
The community is effectively running two very different Rocket Lab scenarios in parallel, and the gap between them is wide.
Bull case: 33% undervalued
"Rocket Lab USA seeks to vertically integrate itself throughout the $800 billion space "backbone" in order to attract the customers operating within that $1 trillion top component of the 'space economy'..."
Read the full Bull Case to see why Rocket Lab could be undervalued
Bear case: 305% overvalued
"The Execution Risk: The entire valuation is "priced for perfection," which means any delay causes volatility..."
Read the full Bear Case to see why Rocket Lab could be overvalued
Do you think there's more to the story for Rocket Lab? Head over to our Community to see what others are saying!
The Bottom Line
Rocket Lab’s Discounted Cash Flow (DCF) intrinsic value framework points to meaningful upside, while market multiples argue the shares already carry a rich price tag. That clash mostly reflects a DCF that leans heavily on future cash generation and funding capacity, against a multiple view that bakes in stretched expectations after a sharp move and penalises current losses. With broader checks only mixed, the key question is whether execution on margins and cash flow can catch up to the valuation the market has already granted. The crux of the bull versus bear debate is whether today’s premium reflects genuine long term earnings power or a potential value trap around execution risk.
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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