How Covestro’s Recent 5.8% Surge Stacks Up After Bloomberg’s Takeover Bid Report

If you are looking at Covestro's stock today and wondering whether now is the right time to buy, sell, or simply hold, you are not alone. This company has seen some notable price moves lately, and its complex story is attracting fresh attention from investors who want to spot value before the crowd catches on. The last close landed at €58.5, and in just the past week, the share price jumped 5.8%. While the 30-day return is still down at -3.6%, the year-to-date gain sits at 4.7% and, over three years, Covestro has delivered an impressive 100.8% growth, easily outpacing many competitors. Those recent gains reflect more than just a change in mood. They hint at shifting risk and potential, especially as the market digests broader sector developments that affect companies like Covestro.

For valuation hawks, Covestro’s current value score comes in at 4 out of 6. This means that, according to standard valuation checks, the company appears undervalued on four distinct measures. This is something worth examining more closely. In the next section, we’ll break down what these checks mean, and how they stack up against Covestro's performance. And before you make any final decisions, I’ll introduce a valuation approach that goes even deeper and could be a game changer for how you look at this stock.

Covestro delivered 3.8% returns over the last year. See how this stacks up to the rest of the Chemicals industry.

Approach 1: Covestro Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and discounting them back to today's euro value. This gives investors a way to look past short-term market fluctuations and focus on the longer-term potential of Covestro.

Currently, Covestro's last twelve months Free Cash Flow (FCF) stands at -€0.83 million, which means the company recently had negative cash flow. However, analyst projections suggest a turnaround, with FCF expected to reach €690 million by 2029. For context, the next five years are guided by direct analyst estimates. Later years are extrapolated by financial modeling. Over the next ten years, Covestro's Free Cash Flow is projected to rise at a robust pace, as anticipated in the 2 Stage Free Cash Flow to Equity model.

According to this DCF analysis, Covestro's estimated intrinsic value comes in at €98.48 per share. With the current share price sitting at €58.5, this implies the stock is trading at a 40.6% discount to its calculated true value. That indicates significant potential upside if these cash flow forecasts play out.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Covestro is undervalued by 40.6%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Covestro Price vs Sales

For companies like Covestro, which may not report consistent profits but still generate substantial revenue, the Price-to-Sales (P/S) ratio is a popular way to value the stock. The P/S ratio helps investors assess how much they are paying for each euro of sales. This is especially useful in the chemicals sector, where margins can fluctuate and profits are sometimes volatile.

Growth expectations and risk play a big part in what counts as a “normal” P/S ratio. Fast-growing companies or those with unique market advantages might justify a higher multiple. Conversely, slower growth or greater risk tends to push the ratio down. Comparing Covestro’s current P/S can give useful context, but it is also important to consider other benchmarks.

Currently, Covestro trades at a P/S ratio of 0.80x, which is significantly lower than the Chemicals industry average of 1.39x and its peer average of 1.46x. On the surface, this suggests Covestro is priced more cheaply than most competitors in its sector. However, Simply Wall St’s “Fair Ratio” brings a deeper level of analysis. This proprietary metric sets a benchmark P/S multiple for Covestro at 0.29x, factoring in the company’s unique growth outlook, risks, profit margins, industry, and market cap. Unlike a straight industry or peer comparison, the Fair Ratio reflects the specific mix of traits that make Covestro different from the average competitor.

Given that Covestro’s current P/S ratio of 0.80x is substantially higher than its Fair Ratio of 0.29x, the stock appears to be trading above what would be considered fair value on this measure.

Result: OVERVALUED

PS 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 Covestro 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 concept where you combine your unique view of Covestro’s future, such as its expected revenue growth, profit margins, or market potential, into a “story” that links business drivers to forecasts and, ultimately, to a fair value for the stock.

Unlike traditional models that just crunch numbers, Narratives let you apply your perspective to the company’s outlook and see how your beliefs stack up against current valuations. This tool is easy to use and is already helping millions of investors on Simply Wall St’s Community page, making sophisticated analysis accessible to everyone.

Narratives help you decide when to buy or sell by comparing your fair value estimate with Covestro’s share price. Because they are dynamic, your fair value will automatically update whenever new information like earnings or news is released. For example, some Covestro Narratives see a fair value as high as €98.48 per share, while others, based on more cautious assumptions, are closer to €61.31. This clearly shows how different perspectives can lead to very different conclusions about whether to buy, hold, or sell.

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