Rocket Lab Sold Kepler a Dedicated Neutron Flight. Here's How Many More It Needs to Justify Its Valuation

Despite several developmental setbacks pushing its first actual launch back to late this year (at the earliest), space-launch outfit Rocket Lab (NASDAQ: RKLB) continues working toward getting its medium-lift Neutron rocket off the launch pad, both figuratively and literally. In fact, although Canada's telecom powerhouse Kepler Communications has previously been content to rely on shared launches with other clients, it recently contracted a Neutron launch all to itself.

And this raises a question: What does it cost to rent a largely reusable rocket for the few minutes required to put a medium-sized satellite into low Earth orbit (LEO)? Follow-up question: How many more of these launches does the company need to line up to justify its current market cap of $44 billion?

Rocket Lab, by the numbers

Rocket Lab is more than just its Neutron rocket, for the record. Its smaller Electron rocket can put up to 660 pounds of payload into low Earth orbit and has done so for more than 260 satellites across 96 launches. The company also offers a range of satellite and space-launch technologies, which is technically its largest profit center at this time.

Rocket Lab's headline story right now, however, is its Neutron rocket that will equip it to compete with Elon Musk's Space Exploration Technologies (NASDAQ: SPCX); you know it better as SpaceX.

Image source: Getty Images.

So what's the going rate to put a medium-sized satellite into space these days? The price isn't necessarily etched in stone, but the range of between $50 million and $55 million that Rocket Lab suggested early last year remains the working figure. For comparison, Rocket Lab's current market cap stands at $44 billion. Assuming a market-typical price/sales ratio of around 4.0, the company would need to book about 200 Neutron flights over the next 12 months to justify such a valuation.

Rocket Lab is more than just this medium-lift rocket, of course. Launches of its smaller Electron go for about $8 million, although its total lifting capacity is much less than Neutron's 28,000 pounds. While less cost-effective on a per-pound basis, the lower price point makes it more accessible and easier to launch more often.

Still, both rockets are just a means to a much bigger end. Rocket Lab's biggest business right now is -- and will likely remain -- satellite equipment and space-based communication solutions, which made up roughly 80% of Q2's top line, extending a trend of lengthening.

And that's the key to coming up with a reasonable valuation or price here. Being able to put equipment into orbit drives its much-bigger business. Although it's only a guess about something that is unknowable, a couple of dozen yearly Neutron launches alone (worth a total of a little more than $1 billion) could be enough to generate more than enough other types of related revenue to justify Rocket Lab stock's price right now.

Two dozen annual launches are still years away

Just bear in mind that the company is years away from generating this degree of revenue, keeping RKLB a risky, volatile stock in the meantime. It's still not a foundational holding you can buy now and simply stop watching for the next few years.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.