Assessing Renault’s Share Price After Stellantis Alliance Sparks Industry Buzz

If you have been watching Renault, you are likely wondering whether now is the moment to make a move on the stock or wait it out. Lately, Renault’s share price has been turning some heads. In just the past week, the stock edged up 1.3%, and over the last month it gained a solid 6.6%. While the year-to-date number is still sitting at -25.2%, that sharp decline may actually have set the stage for a rebound, especially given the longer-term growth. Renault is up 23.0% over three years and an impressive 68.2% across the past five years.

The backdrop to these movements is not just about numbers. Recent market shifts in Europe and renewed interest in the automotive sector have helped reshape how risk is perceived around traditional carmakers, including Renault. Investors are once again weighing Renault’s mix of established market presence and efforts to innovate in a changing industry landscape. The company's ability to hold its ground during periods of volatility has raised questions about whether there is renewed growth potential or if caution is still warranted.

From a pure valuation standpoint, Renault currently boasts a robust value score of 5 out of 6. That means Renault receives a green light on five of the six key checks investors use to determine whether a company is undervalued. It is not just about low prices. It is about measuring real value against potential. So how did we get here? Let’s break down the main valuation methods, and stay tuned, because we will wrap up by looking at an even more insightful way to judge Renault’s worth.

Renault delivered -0.2% returns over the last year. See how this stacks up to the rest of the Auto industry.

Approach 1: Renault Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a method used to estimate a company's true value by forecasting its future cash flows and discounting them back to today’s value. For Renault, this involves projecting the company’s future Free Cash Flows (FCF) and determining what those payment streams are worth at present, expressed in euros (€).

Currently, Renault’s latest twelve months Free Cash Flow stands at approximately €844 Million. Looking ahead, analysts expect solid growth, projecting the company’s FCF to reach nearly €2.4 Billion by 2029. After 2029, projections extending a further five years, using a standard extrapolation approach, continue to show growth, with the 2035 FCF estimate approaching nearly €3 Billion, all in today’s money.

Using these cash flow estimates, the DCF model arrives at an intrinsic fair value of €84.68 per share. Compared to the current share price, this suggests Renault is trading at a steep 58.4% discount. In short, this approach signals that Renault stock is significantly undervalued at present.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Renault is undervalued by 58.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Renault Price vs Sales

The Price-to-Sales (P/S) ratio is a widely used valuation metric, especially for companies where profitability can fluctuate due to industry cycles, heavy investments, or one-off events. For an automaker like Renault, which operates in a capital-intensive sector where profits may vary year to year, the P/S ratio provides a clearer picture of how the market values its overall business activity. This makes it especially suitable in this context.

Investors typically expect companies with stronger growth prospects and lower risk to trade at higher multiples. Slower-growing or riskier firms would warrant lower ones. As such, determining what is “fair” depends on both Renault's outlook and the broader market mood.

Currently, Renault trades at a P/S ratio of just 0.17x. This is significantly below the auto industry average of 0.93x and also well under the peer average of 0.45x. Simply Wall St’s proprietary Fair Ratio for Renault comes in at 0.24x, reflecting factors such as its projected growth, profit margins, industry profile, market cap, and specific business risks.

Unlike basic industry or peer comparisons, the Fair Ratio provides a more tailored valuation anchor. It accounts for what investors might reasonably pay for Renault given its unique growth trajectory, risk profile, and financial performance. This approach does not rely solely on broad averages.

In summary, Renault’s actual P/S multiple is noticeably below its Fair Ratio. This suggests the market is undervaluing Renault’s sales and future prospects relative to its fundamentals.

Result: UNDERVALUED

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 Renault 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 yet powerful concept: it is your story about Renault’s future, where you supply your own estimates for fair value, future revenue, earnings, and profit margins, creating a clear link between what you believe about the business and what the numbers suggest.

Narratives make investing more personal and informed by connecting Renault's business story, whether it is brand realignment, competitive strategy, or industry shifts, to a detailed financial forecast and then to a calculated fair value. This lets you see the logic behind the numbers instead of just accepting stock prices at face value.

Available on Simply Wall St’s Community page, Narratives are accessible, dynamic tools used by millions of investors. They help you decide when to buy or sell by directly comparing your Narrative’s fair value to Renault’s current share price, making your decision process more grounded and transparent.

Because Narratives are updated when new information arises, such as earnings releases or news, you always have the latest outlook for Renault. For example, one investor on the platform projects a fair value for Renault at €63.7 due to aggressive expansion, while another sees just €38.0 based on slower growth expectations.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com