Does the Recent Nestlé Stock Slide Signal Opportunity in 2025?

Thinking about what to do with Nestlé stock right now? You are not alone. Whether you have held shares for years or are sizing up the company for the first time, there is plenty to consider as the world's largest food and beverage company navigates a changing landscape. Over the past few years, the ride has been bumpy. Nestlé's stock closed recently at 71.14, with a 1-year return of -13.5% and a 3-year dip of -27.1%, reminding us that even giants can face strong headwinds. Recent months have only extended the downward trend, with a 30-day return of -4.1% and a year-to-date slide of -4.8%.

Some of these moves reflect broader shifts in how investors view consumer staples globally. Market watchers point to factors like changing consumer preferences and global macroeconomic pressures, which have weighed on many multinationals this year. Despite this cautious mood, there are signals of potential upside. When we run Nestlé through key valuation checks, the company is undervalued in 5 out of 6 screens, giving it a robust valuation score of 5. For anyone considering where the next opportunity might come from, that is a headline worth noting.

So, is Nestlé an overlooked bargain or is there more complexity beneath the surface? Up next, we will break down exactly how those valuation checks work. To top it off, stay tuned for an even sharper lens that can help investors gauge the real value behind the numbers.

Why Nestlé is lagging behind its peers

Approach 1: Nestlé Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a common way to estimate a company’s intrinsic value by projecting future cash flows and discounting them back to today. For Nestlé, this analysis uses the 2 Stage Free Cash Flow to Equity method, which aims to capture both near-term analyst expectations and long-term growth trends.

Nestlé’s most recent Free Cash Flow sits at approximately CHF 8.82 Billion. Analysts project steady growth over the next several years, with free cash flows expected to reach about CHF 12.95 Billion by 2029. Projections further out, based on existing data, continue to show incremental increases in annual cash flows.

Based on these forecasts, the DCF analysis calculates an intrinsic fair value of CHF 153.99 per share. This is considerably higher than the recent market price of CHF 71.14, suggesting the stock is undervalued by roughly 53.8%. A margin this large may indicate a significant disconnect between market price and fundamental value, according to the model.

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 53.8%. 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 widely used valuation metric, especially for consistently profitable companies like Nestlé. It reflects what the market is willing to pay today for a company’s earnings and provides a quick comparison to other businesses in the same sector.

The “normal” or fair PE ratio for a stock is influenced by several factors. Higher growth expectations, lower risk profiles, and stronger profit margins can all justify a higher PE, while the reverse tends to pull it lower. This makes context essential when deciding if a stock's PE suggests it is attractively valued or not.

Currently, Nestlé trades on a PE ratio of 17.8x. That is just a hair above the Food industry average of 16.4x and well below the average for its direct peers at 29.7x. However, benchmarks like the industry and peer average do not always reflect the nuances of individual companies, especially global leaders with unique business models and scale.

This is where Simply Wall St's proprietary “Fair Ratio” comes in. The Fair Ratio for Nestlé is estimated at 29.3x and is calculated specifically for the company based on its earnings growth outlook, market risks, profit margins, and position in its industry. Unlike blunt industry averages, the Fair Ratio offers a deeper, custom view that adjusts for what truly matters to a company’s future performance.

Given the Fair Ratio is 29.3x and Nestlé currently trades at just 17.8x, the stock looks undervalued using this more holistic approach.

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 that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple but powerful way for investors to create their own story about a company, connecting personal perspectives and beliefs to financial forecasts and resulting in a custom fair value estimate.

With Narratives, users describe not just what the numbers are, but why they believe those numbers are likely, so their view of Nestlé’s possible future is translated directly into revenue, margin, and fair value estimates. On Simply Wall St’s Community page, millions of investors can quickly build, share, and revise their Narratives, making it an easy and accessible tool for both beginners and seasoned investors.

Each Narrative links the company’s story to specific financial projections, so you can see at a glance the fair value the Narrative implies, and then compare it to the current market price. Narratives are dynamic. As news breaks or new earnings are released, your fair value estimates update live.

For example, for Nestlé, some community Narratives see digital transformation and innovation in China driving earnings and a fair value as high as CHF 103.0, while more cautious views, focused on brand challenges and cash flow risk, peg fair value as low as CHF 71.0. This shows just how much your perspective matters in the investment process.

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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