Does Volkswagen’s Pledge to Defend European Market Signal Upside for the Stock in 2025?

If you’ve been watching Volkswagen’s stock lately and wondering if now’s the right moment to buy, sell, or simply hold, you’re not alone. After all, the last twelve months haven’t exactly been a straight road for investors. Over the past week, Volkswagen shares rose by 2.9%, which helped offset some of the ground lost in the last month, when the stock slid 5.8%. Year-to-date, it’s still holding onto a 6.8% gain, with a moderate 5.8% return over the last year. That’s solid, but perhaps not the turbocharged performance some were hoping for.

Behind these numbers are shifting perceptions about Volkswagen’s growth potential and competitive risks. Headlines lately have focused on the company’s determination to maintain its dominance in the European market, especially as Chinese automakers accelerate their push into Europe. At the same time, Volkswagen continues to explore opportunities abroad, with reported talks about new investments in the U.S. and a renewed strategic focus for its Audi division. These factors have introduced both new optimism and a few question marks around the stock’s next moves.

So, what do the numbers say about value? When we look at Volkswagen through six widely used valuation checks, the company comes out undervalued in five of them, giving it a robust value score of 5 out of 6. Whether you’re a seasoned investor or just Volkswagen-curious, the next step is to unpack what those valuation methods actually mean for your portfolio and why there might be an even smarter way to approach value tucked away at the end of our analysis.

Volkswagen delivered 5.8% returns over the last year. See how this stacks up to the rest of the Auto industry.

Approach 1: Volkswagen Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s value by forecasting its future cash flows and discounting them back to today’s value. This helps investors determine what the business is intrinsically worth in the current market.

For Volkswagen, free cash flow over the last twelve months was negative, at -€10.5 billion. However, projections suggest a significant turnaround, with analyst forecasts seeing positive free cash flow reaching €6.7 billion by 2028. In addition to analyst estimates, further projections by Simply Wall St anticipate Volkswagen’s free cash flows will continue growing steadily, reaching approximately €6.9 billion to €6.8 billion annually over the following years. These multi-year forecasts assume the company can maintain and gradually build its cash-generation in the coming decade, even amid ongoing industry challenges.

Based on these cash flow projections and using the DCF method, Volkswagen’s intrinsic value is estimated at €143.54 per share. This is about 35% higher than its current share price, indicating that the stock may be significantly undervalued relative to its future prospects.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Volkswagen is undervalued by 35.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Volkswagen Price vs Earnings

The price-to-earnings (PE) ratio is widely used to value profitable companies, offering investors a quick way to compare how much they are paying for each euro of earnings. It is especially relevant for established firms like Volkswagen, as it reflects both current profitability and market sentiment around future growth.

The “right” PE ratio depends on several factors. For example, rapid growth companies often justify higher PE multiples, while those with greater risks or slower prospects tend to trade lower. Risk, profit margins, and future earnings expectations all play crucial roles in determining a fair PE.

Volkswagen is currently trading at a PE ratio of 5.56x. This is noticeably below both the Auto industry average of 18.02x and the peer group average of 11.43x. On face value, this suggests the market is pricing in lower growth or more significant risks for Volkswagen compared to its competitors.

However, Simply Wall St’s proprietary “Fair Ratio” provides a more detailed assessment. It evaluates what multiple Volkswagen deserves by weighing its unique mix of earnings growth, profit margins, industry trends, company size, and specific risk profile. Unlike a simple comparison with peers or the sector, this method delivers a tailored benchmark for valuation.

For Volkswagen, the Fair Ratio is calculated at 14.77x, well above the current PE ratio of 5.56x. This gap signals that the market may be overlooking Volkswagen’s intrinsic potential, suggesting a meaningful discount relative to what the stock could be worth given its fundamentals.

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 Volkswagen Narrative

Earlier we mentioned that there might be an even better way to approach valuation: Narratives. Now is the perfect time to introduce them. A Narrative is an investing tool that invites you to connect the story you believe about Volkswagen (or any company) with your expectations for its sales, profit margins, and fair value. This creates a bridge between qualitative insights and concrete financial forecasts. Narratives take you beyond static numbers by letting you articulate your own perspective, your "story," and see how it stacks up against community insights or analyst projections, all within the Community page on Simply Wall St where millions of investors share and refine their views.

This approach empowers you to evaluate whether Volkswagen is worth buying or selling by comparing the Fair Value from your story-driven forecast with today’s market price. The tool keeps your analysis fresh by automatically responding when new earnings or breaking news arrives. For example, while some investors see Volkswagen’s fair value as low as €68.4 due to recent strategic missteps and margin setbacks, others project a much brighter trajectory, estimating fair value as high as €113.55 based on electrification growth and successful restructuring. This demonstrates how Narratives clarify not only what you believe, but also what to do next.

For Volkswagen, we’ll make it really easy for you with previews of two leading Volkswagen Narratives:

🐂 Volkswagen Bull Case

Fair Value: €113.55

Undervalued by: 17.8%

Analyst Revenue Growth Forecast: 2.8%

• Expansion in electrified vehicles and digital services, combined with operational restructuring and a focus on premium, high-return markets, positions Volkswagen for future growth and improved profitability resilience.
• Investments in local production, global partnerships, and new cost optimization measures are anticipated to reduce geopolitical risk, enable margin recovery, and support recurring revenue streams.
• Key risks stem from trade tensions and electric vehicle competition. However, the consensus view expects gradual earnings and margin improvement, with a price target 12.8% above today’s share price.

🐻 Volkswagen Bear Case

Fair Value: €68.40

Overvalued by: 36.4%

Revenue Growth Forecast: 1.0%

• Volkswagen has suffered from strategic missteps, including overreliance on its home market, delayed electric vehicle transitions, and a cumbersome management structure.
• Profit margins are under pressure from past scandals, weak performance abroad, and increasing exposure to tariff risks and shrinking demand in key markets outside Germany.
• New model launches offer some glimmers of hope, but persistent setbacks and missed targets suggest muted growth and a share price at risk of further decline.

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