Last Update 05 Dec 25
Fair value Decreased 0.79%ML Share Price Will Recover As Premium Mix Supports Margin Stability
Analysts have nudged their fair value estimate for Compagnie Générale des Établissements Michelin Société en commandite par actions slightly lower, from approximately EUR 31.60 to around EUR 31.35. This reflects trimmed expectations for revenue growth and profit margins, even as Michelin remains a preferred name in the European tire sector.
Analyst Commentary
Recent Street research paints a mixed but generally constructive picture for Compagnie Générale des Établissements Michelin Société en commandite par actions, with several firms trimming price targets while still highlighting the stock as a relative winner within the European tire space.
Bullish analysts continue to emphasize Michelin's quality of execution, resilient pricing power, and leverage to a medium term recovery in replacement and premium segments, even as they acknowledge a more muted near term growth backdrop.
At the same time, a cohort of more cautious voices has emerged, cutting targets to reflect lower margin and volume assumptions, alongside a higher risk free rate embedded in discount rates.
Bullish Takeaways
- Bullish analysts still see Michelin as offering the most upside within the European tire peer group. They argue that its valuation does not fully reflect its stronger brand equity and mix in premium tires.
- They highlight that, despite lower price targets, the majority of ratings remain Buy or Overweight. This points to confidence in management's ability to execute on cost efficiency and capital allocation plans.
- The relative downgrade of key peers, together with Michelin's status as a top pick, is seen as reinforcing Michelin's strategic positioning and potential for outperformance as demand normalizes into 2026.
- Some constructive views also point to the company's diversified end market exposure and growing specialty businesses as buffers that support earnings quality and justify a premium to historical mid cycle multiples.
Bearish Takeaways
- Bearish analysts have cut price targets meaningfully, in some cases by mid to high single digits, to account for softer volume growth expectations and slower operating margin expansion than previously anticipated.
- The presence of Neutral ratings, including from large global houses such as JPMorgan, signals concern that the current share price already discounts much of the medium term recovery story, limiting near term multiple expansion.
- There is heightened caution around potential downside risks if input cost tailwinds fade faster than expected or if pricing discipline weakens in a more competitive environment, which could pressure free cash flow generation.
- Some more cautious views also flag the lack of clear, near term catalysts relative to certain peers. They argue that investors may need to wait longer for upgrades to consensus earnings and for the stock's rerating to materialize.
Valuation Changes
- The fair value estimate edged down slightly from approximately €31.60 to about €31.35 per share, reflecting modestly lower expectations for long term performance.
- The discount rate decreased marginally from around 8.65 percent to roughly 8.49 percent, implying a slightly lower required return in the valuation model.
- Revenue growth was revised down modestly from about 2.55 percent to approximately 2.49 percent, signaling a small tempering of top line growth assumptions.
- The net profit margin was trimmed slightly from roughly 9.08 percent to around 8.93 percent, indicating a minor reduction in long term profitability expectations.
- The future P/E was nudged up marginally from about 10.91 times to approximately 10.98 times, suggesting a slightly higher valuation multiple applied to forward earnings.
Key Takeaways
- Streamlined manufacturing, sustainability leadership, and innovation in EV and eco-friendly tires position Michelin for margin expansion, stronger pricing power, and long-term growth.
- Diversification in China and services expansion support stable revenues and lessen dependence on mature markets amid global urbanization and rising replacement demand.
- Exposure to adverse currency movements, regulatory burdens, structural industry shifts, intensifying low-cost competition, and volatile input costs pose significant ongoing risks to profitability and growth.
Catalysts
About Compagnie Générale des Établissements Michelin Société en commandite par actions- Engages in the manufacture and sale of tires worldwide.
- Recent restructuring and optimization of Michelin's manufacturing footprint, including plant closures and streamlining, is set to deliver a significant €200 million annual benefit to margin and efficiency, with the full impact expected to materialize in H2 2025 and beyond as volumes recover-supporting margin expansion and free cash flow.
- Michelin's technology leadership and ongoing innovation, showcased by new product launches (e.g., CrossClimate 3 and X LINE GRIP D) and top performance in abrasion and energy efficiency, are well-aligned with rising demand for specialized tires for EVs and sustainability-focused vehicle platforms, paving the way for revenue growth and improved pricing power.
- The company's leadership in sustainability, validated by third-party ratings (CDP AAA, SBTi validation) and reduction in CO2 and water usage, positions Michelin to benefit as regulations tighten and customers increasingly value environmental performance-likely translating to higher net margins and stronger brand loyalty.
- Growing logistics, last-mile delivery, and commercial fleet activities (amplified by global urbanization) are expanding tire replacement cycles and boosting demand for high-performance aftermarket and recurring tire solutions, underpinning stable revenues and further growth opportunities in Michelin's Services & Solutions segment.
- Successful geographic diversification-especially in China, where Michelin enjoys strong premium positioning and relationships with leading domestic OEMs-coupled with new digital and sustainability-driven offerings, signals durable long-term revenue growth potential and a reduced dependency on mature markets.
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Compagnie Générale des Établissements Michelin Société en commandite par actions's revenue will grow by 2.9% annually over the next 3 years.
- Analysts assume that profit margins will increase from 5.8% today to 10.0% in 3 years time.
- Analysts expect earnings to reach €2.9 billion (and earnings per share of €4.25) by about September 2028, up from €1.6 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as €2.3 billion.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.9x on those 2028 earnings, down from 13.9x today. This future PE is lower than the current PE for the GB Auto Components industry at 11.7x.
- Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 7.9%, as per the Simply Wall St company report.
Risks
What could happen that would invalidate this narrative?- Persistent headwinds from foreign exchange rates, especially a strengthening euro against the US dollar (where Michelin earns 30% of group sales), may continue to negatively impact revenues, operating income, and free cash flow in coming years if currency trends do not reverse.
- Tariffs, new public duties, and regulatory pressures (such as EUDR and ongoing investigations in Europe) have already resulted in significant direct costs (€200 million for tariffs alone in 2025), and further tightening of such trade and environmental regulations globally could compress net margins and require continual adaptation of production strategy.
- Cyclical and secular declines in original equipment (OE) volumes-especially for trucks, buses, and agriculture/infrastructure-highlight the risk that structural shifts toward lower vehicle production and changing vehicle types (electric/autonomous vehicles, shared mobility, and potential for lighter/smaller tires) could lead to sustained volume pressure and ultimately lower overall revenue growth.
- Intensifying competition from low-cost Asian tire manufacturers, particularly evident in Tier 3 brand imports and overstock situations in North America, threatens to erode pricing power and market share, posing downside risk to both segment revenues and premium brand net margins.
- High sensitivity to raw material price volatility (notably natural rubber and synthetic inputs) combined with potential underutilization of production capacity (especially following recent closures and restructurings) could result in continued pressure on operating margins and limit earnings visibility, particularly if cost savings from restructuring fail to materialize as quickly or fully as planned.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of €36.177 for Compagnie Générale des Établissements Michelin Société en commandite par actions based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €43.0, and the most bearish reporting a price target of just €28.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €29.1 billion, earnings will come to €2.9 billion, and it would be trading on a PE ratio of 10.9x, assuming you use a discount rate of 7.9%.
- Given the current share price of €30.65, the analyst price target of €36.18 is 15.3% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
