Does Adecco Present an Opportunity After Shares Slide 12% Amid Market Volatility?

Thinking about what to do with Adecco Group stock? You are not alone. With shares closing most recently at 22.64, this is the kind of moment that gets investors reaching for their calculators. It has been a mixed ride over the past year, down 12.4% on a 12-month view and off 36.4% from five years ago. However, there is a glimmer of positivity too, with a 1.6% return so far this year. The last month has been especially tough with a 12.9% drop, which follows a wider market trend as investors recalibrate risk in sectors tied to economic cycles. Still, the stock's modest 1.1% slip over the past week signals a possible stabilization as the news cycle moderates.

With this recent volatility, the big question on every investor's mind is whether Adecco Group is undervalued or just a value trap. To help find some clarity, we have run the stock through six key valuation checks, and it comes out shining in five. That gives the company a solid valuation score of 5. The numbers are compelling, but the story gets even more interesting when we dig into how these valuation approaches stack up and why a single score can't always tell the full story. Let's take a closer look at those methods, and later, I will share a smarter way to frame the whole valuation picture.

Why Adecco Group is lagging behind its peers

Approach 1: Adecco Group Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) approach is built to answer one core question: what are the Adecco Group's future cash flows truly worth in today's money? This model works by forecasting the company's future Free Cash Flow (FCF), then discounting those projections back to a present-day value.

For Adecco Group, the latest twelve months' FCF came in at €374.87 million. Analysts project that this figure will increase over time, with estimates reaching €540.74 million by the end of 2027. Looking further ahead, extrapolated estimates suggest Adecco Group could generate over €698 million in annual FCF a decade from now, though these longer-term numbers are less certain.

Based on these projections, the DCF model calculates an intrinsic value per share of €68.44. With Adecco Group shares currently trading at €22.64, the implied discount is 66.9%. This wide gap indicates the stock is significantly undervalued according to this cash flow analysis.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Adecco Group.

Our Discounted Cash Flow (DCF) analysis suggests Adecco Group is undervalued by 66.9%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Adecco Group Price vs Earnings

The Price-to-Earnings (PE) ratio is a go-to valuation metric when analyzing profitable companies like Adecco Group. It helps investors understand what the market is willing to pay for each unit of current earnings. A company’s PE ratio typically reflects not just its latest profits, but also investors’ expectations for future growth and their perception of risk in the business. Generally, higher expected growth rates or lower risk can lead to a higher "normal" PE ratio. In contrast, slower growth or higher risk may push the fair level down.

Right now, Adecco Group trades at a PE ratio of 14x. For context, the Professional Services industry average PE is 20.5x, and the peer group sits around 21.1x. This signals that Adecco is valued more conservatively by the market compared to its main competitors and sector as a whole.

Simply Wall St’s proprietary “Fair Ratio” model refines this comparison by calculating a fair PE multiple tailored to Adecco Group’s own profile. The Fair Ratio here is 20.4x, which accounts for the company’s growth prospects, risk profile, profit margins, size, and the dynamics of its industry. This approach is more insightful than simply benchmarking against peers or industry averages because it factors in the company’s unique mix of strengths and challenges.

Comparing Adecco's actual PE ratio of 14x to its Fair Ratio of 20.4x, the shares look undervalued based on this important yardstick.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Adecco Group Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your own story about a company, connecting what you believe about its future, such as potential revenue, profit margins, growth, and the factors shaping its industry, with a financial forecast and a fair value estimate. Narratives take the numbers further by giving them meaning, tying what’s happening in the business to concrete value calculations.

On Simply Wall St’s Community page, millions of investors are already using Narratives as an easy tool to track and refine their opinions about companies like Adecco Group. Narratives help you decide whether to buy, sell or wait by clearly showing how your fair value compares to the current share price. Because they update dynamically when news or fresh results come in, your perspective always stays relevant.

For example, different investors using Narratives for Adecco Group can have very different views. Some think a price target near CHF42.73 is justified if AI-driven efficiency boosts profits, while others see risks that could limit upside, supporting a more cautious CHF18.62. The beauty of Narratives is that you can build and follow your own evidence-based view, refining your investment decisions as the story changes.

Do you think there's more to the story for Adecco Group? Create your own Narrative to let the Community know!

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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