Is Now a Good Time to Revisit Mercedes-Benz Shares After $324M Nissan Stake Sale?

If you’re eyeing Mercedes-Benz Group stock, you’re definitely not alone, and you might be wondering whether now is the moment to shift gears in your portfolio or let it cruise. After all, the stock has been on a quietly impressive run lately. Just in the past week, shares have climbed 5.4%, building on a 3.8% gain over the last month. That is not just a blip either. With a year-to-date return of 4.0%, a 1-year gain of 5.4%, and a commanding 87.3% total return over five years, Mercedes-Benz Group has steadily rewarded patient investors.

Recent headlines have added new angles to the Mercedes-Benz narrative. For instance, the company’s decision to fully divest its stake in Nissan for over $324 million did not rattle traders. In fact, it signaled a strategic tightening of focus that markets have taken in stride. Industry buzz about electrification, with rivals like Amazon testing electric vans and XPeng plotting overseas moves, keeps the entire sector in motion. However, Mercedes-Benz’s adaptability and legacy put it in a different league of resilience and credibility.

But is Mercedes-Benz Group undervalued right now? To help answer that, we use a comprehensive approach with six rigorous valuation checks, spanning everything from price-to-earnings to asset value. Mercedes-Benz Group passes five out of six, giving it a strong valuation score of 5.

Let’s break down exactly which valuation metrics matter and how Mercedes-Benz Group stacks up in each. Afterwards, we will look into an even smarter way to judge value that goes beyond the classic formulas.

Mercedes-Benz Group delivered 5.4% 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 aims to estimate what a business is truly worth based on the cash it is expected to generate in the future. It works by projecting future free cash flows and then discounting them back to their value today, using a suitable rate that accounts for risk and time.

For Mercedes-Benz Group, the latest reported free cash flow stands at €13.26 billion. Analysts provide detailed forecasts up to 2029, projecting a free cash flow of €6.34 billion by that year. Beyond this, further cash flow projections up to 2035 are extrapolated based on conservative annual growth rates, with figures notably decreasing and then gradually rising, as would be expected for a mature industry leader.

Bringing all these future cash flows into today's terms, the model estimates the fair value per share at €82.88. At current levels, this implies Mercedes-Benz Group stock is trading at a 33.6% discount to its intrinsic value, making it appear significantly undervalued by this method.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Mercedes-Benz Group is undervalued by 33.6%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Mercedes-Benz Group Price vs Earnings

One of the most common ways to value a profitable company like Mercedes-Benz Group is through its price-to-earnings (PE) ratio. The PE ratio helps investors gauge how much they are paying for each euro of current earnings, making it particularly relevant when the company has steady and meaningful profits. A higher PE can reflect strong growth expectations, lower risk, or premium market positioning. Conversely, a lower PE can signal muted prospects or overlooked value.

Mercedes-Benz Group currently trades at a PE ratio of 7.8x. For perspective, the average for its automotive peers is 10.9x, and the broader auto industry average is 18.0x. At first glance, Mercedes-Benz appears notably cheaper than both its immediate competitors and the overall sector.

However, instead of relying solely on peer or industry comparisons, Simply Wall St’s proprietary “Fair Ratio” metric takes a deeper look. The Fair Ratio adjusts for the company’s specific earnings growth trajectory, its level of risk, profit margins, market cap, and the unique dynamics of its industry. This approach provides investors with a benchmarking tool better tailored to Mercedes-Benz’s circumstances compared to a blanket sector average. According to this approach, Mercedes-Benz Group’s Fair Ratio is estimated at 10.6x. With the stock trading at 7.8x, it is well below what would be expected given its underlying fundamentals and sector landscape.

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 Mercedes-Benz Group Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your personal, story-driven perspective on Mercedes-Benz Group, connecting the company’s business outlook and strategy directly to a tailored financial forecast and, ultimately, a fair value estimation.

Rather than just relying on conventional metrics, Narratives let you shape your viewpoint by setting your own assumptions about future earnings, revenue growth, and margins. This bridges the gap between “the numbers” and “the story,” making your investment decisions more meaningful and actionable.

Narratives are simple to create and update through the Community page on Simply Wall St, where millions of investors share and debate their perspectives. Each Narrative dynamically adapts when new news or results emerge. This means you can compare your fair value to Mercedes-Benz Group’s current price in real time, helping you decide when it is the right moment to buy, hold, or sell based on your unique view of the company’s future.

For example, one investor might believe Mercedes-Benz’s electrification and premium platform wins will drive a fair value as high as €83.0, while another, more cautious investor, may estimate just €40.0. This demonstrates there is no one-size-fits-all answer, only the Narrative that best reflects your beliefs and research.

Do you think there's more to the story for Mercedes-Benz 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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