Assessing Nestlé Stock Value After Expansion into Affordable Nutrition Products

Deciding what to do with Nestlé stock these days is far from straightforward. If you’ve held shares, you know the ride hasn't been smooth. Just look at the numbers: while the stock has bounced back 7.5% over the last week and surged 14.2% over the past month, it’s still down about 0.7% over the last year, and even further over three and five years. The question is, does this momentum signal a long-awaited turnaround or is there more volatility ahead?

Recent headlines have added fuel to the conversation. For instance, there has been growing attention on Nestlé’s expansion into affordable nutrition products, especially in emerging markets, as well as strategic investments in plant-based foods. These moves have re-energized some investor optimism around growth, potentially explaining the uptick in short-term gains. However, the market’s mood hasn’t fully shifted and questions about long-term profitability and global demand still hang in the air.

Now, with so much changing, how is the company stacking up on value? Using six different checks to gauge whether a stock is undervalued, Nestlé scores 4 out of 6. That’s a solid showing, but it isn’t the full story. Let’s walk through how those valuation approaches break down. After looking at the numbers, stick around for a smarter way to think about valuation that could help you make even better stock decisions.

Why Nestlé is lagging behind its peers

Approach 1: Nestlé Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model offers a lens into Nestlé’s true worth by projecting the company's future free cash flows and discounting them back to today’s value. This approach aims to strip away market noise and focus on the core earning power of the business over time.

Currently, Nestlé generates CHF 8.8 Billion in free cash flow. Analysts estimate steady growth over the next five years, and projections see free cash flow rising to CHF 11.9 Billion by 2029. For the years beyond analyst coverage, expert models extrapolate continued, though moderating, growth. All figures are based on cash flows reported in Swiss Francs (CHF).

Based on these projections, the DCF model calculates an intrinsic value of CHF 144.01 per share. Given that this value represents a 43.2% discount compared to the current share price, Nestlé shares appear significantly undervalued according to this analysis.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Nestlé is undervalued by 43.2%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Nestlé Price vs Earnings

The price-to-earnings (PE) ratio is a classic yardstick for valuing profitable companies like Nestlé because it relates a company’s share price directly to its earnings, giving investors a snapshot of what the market is willing to pay for each franc of profit. This makes it especially relevant for mature businesses with steady earnings streams.

However, what counts as a “normal” or “fair” PE ratio is not set in stone. It is influenced by growth expectations and risk. Higher expected earnings growth or lower perceived risk often justify a higher PE, while slower growth or higher uncertainty typically pull it down.

Currently, Nestlé trades at a PE ratio of 20.43x. For comparison, the average PE ratio for the broader Food industry is 16.15x and the average for Nestlé’s peers comes in much higher at 31.03x. This puts Nestlé somewhere in between, ahead of the average food stock but far below the peer group’s lofty valuations.

To refine this picture, we turn to Simply Wall St’s “Fair Ratio.” This proprietary metric estimates what PE multiple Nestlé actually deserves based on factors like its earnings growth, profit margin, market cap, industry, and risk profile. This delivers a customized benchmark rather than a one-size-fits-all average. This individualized approach provides a clearer sense of value than a straightforward industry or peer comparison ever could.

According to the Fair Ratio, a justifiable multiple for Nestlé today would be 28.80x. Compared to its current 20.43x, Nestlé’s shares look attractively valued on this measure, suggesting the market may not be fully recognizing its strengths or future prospects.

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 Nestlé Narrative

Earlier we mentioned there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is simply the story you believe about Nestlé’s future. It connects your perspective on the company’s business (why it can succeed or struggle) to your expectations for future revenue, earnings, and profit margins, and, ultimately, to what you believe the stock is really worth.

With Narratives, you do not just look at numbers in isolation. You explain your reasoning, make your own forecasts, and arrive at your own Fair Value. You can access and build Narratives directly on Simply Wall St’s Community page, where millions of investors do the same. This makes the tool both accessible and easy to use.

Narratives help you decide whether Nestlé is worth buying or selling by letting you compare your Fair Value (based on your story) with today’s price. They update automatically when new information or news arrives, so your analysis stays relevant.

For example, one investor may write a bullish Narrative using optimistic forecasts and assign a Fair Value up at CHF 103.0, expecting growth from digital transformation and China expansion. A more cautious Narrative might target CHF 71.0, citing margin pressure and slower demand as key risks.

Do you think there's more to the story for Nestlé? 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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