Is Mercedes-Benz a Bargain After Recent 6% Jump and EV Partnership News?

• If you have ever wondered whether Mercedes-Benz Group stock is worth its price tag, you are in the right place. Let us break down the numbers together and discover whether there is value hiding in plain sight.
• The stock has caught investors' attention recently, climbing 6.1% in the last week and up 10.8% for the past year. This has put its growth potential front and center.
• There has been increased buzz around Mercedes-Benz Group following its advancements in electric vehicle technology and recent partnerships aimed at expanding its EV lineup. Investors and analysts alike are discussing what these moves could mean for the company's future position among global automakers.
• On our fair value checks, Mercedes-Benz Group scores 5 out of 6, suggesting it could be undervalued. We are going to explore how different valuation approaches view the company, but keep an eye out for an even smarter perspective on value at the end of this article.

Mercedes-Benz Group delivered 10.8% returns over the last year. See how this stacks up to the rest of the Auto industry.

Approach 1: Mercedes-Benz Group Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model projects a company's future cash flows and then discounts them back to their present value. This provides an estimate of what the business is really worth today based on expected performance.

For Mercedes-Benz Group, the current Free Cash Flow stands at approximately €13 billion. Analyst forecasts cover the first five years, and after that, further yearly cash flows are extrapolated. Ten years out, in 2029, Free Cash Flow is projected to be nearly €6 billion, with estimates for the interim years as well. This trajectory reflects both analyst insight and systematic projections by Simply Wall St, presenting a picture of steady, though moderating, growth in Mercedes-Benz Group’s ability to generate cash.

According to this valuation approach, the estimated intrinsic value per share is €73.80. The DCF model suggests that the stock is trading at a 22.3% discount to its intrinsic value. This indicates that Mercedes-Benz Group shares are undervalued by a sizable margin compared to what the underlying cash flows suggest.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Mercedes-Benz Group is undervalued by 22.3%. Track this in your watchlist or portfolio, or discover 839 more undervalued stocks based on cash flows.

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

Approach 2: Mercedes-Benz Group Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is considered one of the best ways to value profitable companies, as it relates a company’s share price directly to its earnings. A lower PE could mean the company is undervalued, while a higher PE might signal growth expectations, less risk, or both.

The “right” PE ratio depends on several factors. Companies expected to grow faster or with lower risk profiles typically justify higher PE ratios, whereas businesses facing uncertainties or slow growth tend to trade at lower multiples. Comparing Mercedes-Benz Group’s PE ratio to its industry and peer benchmarks can help to reveal how the market views its earnings prospects.

Currently, Mercedes-Benz Group trades at a PE of 8.8x. That is less than half of the auto industry average of 18.5x and lower than the peer average of 17.9x, highlighting investors’ cautious stance. However, to get a more tailored view, Simply Wall St’s “Fair Ratio” estimates what the multiple ought to be for Mercedes-Benz Group based on factors like its growth, profit margins, industry, market cap, and risk profile. The Fair Ratio for Mercedes-Benz Group is calculated at 12.4x.

Unlike simple industry or peer comparisons, the Fair Ratio takes a holistic approach and offers a more accurate picture of the value you are getting. It incorporates fundamental company factors as well as market conditions, so you can make a better-informed decision about whether the stock is priced appropriately.

Since Mercedes-Benz Group’s actual PE of 8.8x is well below its Fair Ratio of 12.4x, the stock appears undervalued on this metric as well.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1411 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Mercedes-Benz Group Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a user’s personal story or perspective on a company’s future, blending their own forecasts for revenue, earnings and margins with their assumptions about fair value, all brought together in one clear view.

Narratives link the company’s story to a financial forecast and then directly to a fair value, transforming the way you approach investment decisions. They are simple to create and use on Simply Wall St’s Community page, where millions of investors share and update their perspectives.

With Narratives, you can easily compare your fair value estimate to today’s share price and decide whether Mercedes-Benz Group is a buy, hold, or sell. Because Narratives are dynamic, they update automatically as new news and results emerge. For example, one investor might build a Narrative around strong EV expansion and premium pricing, resulting in a bullish fair value near €83, while another could focus on trade pressure and margin risks, suggesting a much lower fair value closer to €40. Narratives empower every investor to invest according to their own view, with timely, relevant data at their fingertips.

Do you think there's more to the story for Mercedes-Benz Group? Head over to our Community to see what others are saying!

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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