Rheinmetall (XTRA:RHM) Valuation in Focus Following Recent Stock Fluctuations

Rheinmetall (XTRA:RHM) has been making headlines lately after a period of mixed stock performance that has caught investors’ attention. With no single major announcement behind the recent price swings, some are left wondering whether the latest movement signals something deeper about the company’s standing in the market. This is particularly relevant as the defense and automotive supplier continues to navigate an evolving landscape in Europe. Investors are watching closely for cues, trying to determine if the current levels present a real chance to jump in or a sign to hold back and wait.

The short-term journey has not been smooth, as Rheinmetall’s share price has slipped around 9% over the past month and the past three months, despite not facing any significant negative catalyst. Looking at the longer term, there is evidence of resilience, with shares still up 2% over the past year and delivering a strong 21% return in the past five years. Recent financials show continued revenue and profit growth, reflecting stable operations even as global industry trends shift.

With this year’s ups and downs, investors are considering whether Rheinmetall is undervalued at current levels or if the market has already factored in all future growth potential.

Most Popular Narrative: 78.6% Undervalued

The prevailing view presented in the narrative by Noggerno suggests that Rheinmetall stock is dramatically undervalued. The shares may be trading significantly below what its future earnings could justify, considering developments in European defense budgets and the company's market positioning.

If European NATO members were to raise their military spending to approximately 3% of GDP, this would result in a combined yearly expenditure of over 500 billion euros. On 12th March 2025, Rheinmetall management estimated that 20% to 25% of total military spending could be allocated to Rheinmetall. In my opinion, this seems plausible, as it would be challenging to allocate such a large sum elsewhere other than with Rheinmetall.

Curious about the bold math behind this high fair value estimate? The narrative is based on assumptions that challenge industry norms and envision Rheinmetall in a new position within European defense spending. Interested in which future company metrics could redefine its valuation potential? The specifics may surprise even experienced investors.

Result: Fair Value of €7,569.5 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, changes in defense procurement priorities and the challenge of expanding production capacity could undermine these optimistic projections for Rheinmetall’s valuation.

Find out about the key risks to this Rheinmetall narrative.

Another View: Market Multiple Tells a Different Story

Looking from another angle, the standard price-to-earnings comparison signals the stock is more expensive than other defense companies across Europe. This contrast raises the question: which narrative really matches Rheinmetall’s outlook?

See what the numbers say about this price — find out in our valuation breakdown.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Rheinmetall for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Rheinmetall Narrative

If you have a different perspective or want to dig into the numbers on your own terms, you can easily shape your own Rheinmetall story in just a few minutes, and do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Rheinmetall.

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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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