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Renault’s share price has fallen 32.6% over the past year, yet its valuation checks and intrinsic value estimate from a Discounted Cash Flow (DCF) model both point to the stock trading at a discount to what the underlying cash flows suggest.
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Renault is down 32.6% over the past year, which puts recent investor sentiment at odds with indicators that point to a cheaper share price than many peers.
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Shifting more vehicle development to China may support long term competitiveness on electric vehicles and software. However, ongoing scrutiny of emissions practices and regulatory standards remains a key risk for how the market prices the stock.
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Renault screens as undervalued on 5 of 6 checks in Simply Wall St’s broader assessment, indicating that several different metrics currently lean toward the shares being cheap rather than expensive 5/6 valuation score.
The issue now is whether Renault’s discounted market price is a fair reflection of its risks or an opportunity relative to its intrinsic value estimate.
Find out why Renault’s -32.6% return over the last year is lagging behind its peers.
Is Renault Still Cheap on Cash Flow?
The Discounted Cash Flow (DCF) model here uses projected free cash flows to estimate what Renault’s shares could be worth today. Renault’s latest twelve month free cash flow shows an outflow of about €794 million, but analyst projections in the model assume the company moves back to growing positive free cash flows over time.
Using this 2 Stage Free Cash Flow to Equity approach, the model arrives at an estimated intrinsic value of about €50.36 per share. Compared with the current market price, this implies the stock is 48.8% undervalued on these cash flow assumptions. Because Renault is increasingly relying on China for vehicle development and software, the market may be weighing execution and regulatory risks more heavily than the DCF suggests.
Despite Renault’s court success in the England & Wales diesel emissions litigation improving one area of legal risk, the shares still trade at a discount to what the projected cash flows suggest.
On this DCF view, Renault stock currently screens as undervalued relative to its estimated intrinsic value.
Our Discounted Cash Flow (DCF) analysis suggests Renault is undervalued by 48.8%. Track this in your watchlist or portfolio, or discover 211 more high quality undervalued stocks.
