Assessing Vallourec’s Valuation After Recent Share Price Cooldown and Strong Multi Year Gains

• Wondering if Vallourec is still good value after its recovery story, or if the easy money has already been made? This breakdown will walk you through what the current price is really implying.
• The stock has cooled off recently, down around 1% over the last week and 5% over the last month. It is still up roughly 55% over three years and 72% over five, which indicates that the long term rerating has been meaningful.
• Those moves sit against a backdrop of structural shifts in energy infrastructure demand and Vallourec's ongoing efforts to streamline its footprint and focus on higher margin tubular solutions. These factors have gradually reshaped how investors see the business. At the same time, balance sheet repair and a clearer strategic focus have helped shift the narrative from survival to long term positioning in energy and low carbon applications.
• On our numbers, Vallourec scores a perfect 6/6 valuation checks, which is a strong starting signal that the market may still be underappreciating its cash flows and assets. Next we will unpack the main valuation approaches before circling back to a more nuanced way of judging what the stock is really worth.

Find out why Vallourec's 1.9% return over the last year is lagging behind its peers.

Approach 1: Vallourec Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth by projecting the cash it can generate in the future and then discounting those cash flows back into today’s euros. For Vallourec, the 2 Stage Free Cash Flow to Equity model starts from last twelve months free cash flow of about €370.8 million and uses analyst forecasts for the next few years, then extrapolates further out using Simply Wall St assumptions.

Analysts currently see free cash flow reaching roughly €426 million by 2028, with further modeled cash flows in the following years hovering around the low to mid €400 million range. When all of these projected cash flows are discounted back, the model arrives at an estimated intrinsic value of €33.44 per share.

Compared to the current market price, this suggests Vallourec is trading at a 54.1% discount to its estimated fair value, indicating a substantial margin of safety if the projections prove broadly accurate.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Vallourec is undervalued by 54.1%. Track this in your watchlist or portfolio, or discover 927 more undervalued stocks based on cash flows.

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

Approach 2: Vallourec Price vs Earnings

For a company that is generating solid profits like Vallourec, the price to earnings, or PE, ratio is a useful way to gauge whether investors are paying a sensible price for each euro of earnings. In general, faster growing and lower risk businesses tend to justify a higher PE, while slower growth or higher uncertainty usually calls for a lower multiple.

Vallourec currently trades on a PE of about 8.7x, which is materially below both the Energy Services industry average of roughly 14.8x and the broader peer group, which sits closer to 16.1x. On the surface, that makes the stock look inexpensive compared to its sector.

Simply Wall St also estimates a proprietary Fair Ratio of 14.5x for Vallourec, which reflects what its PE should be once you factor in its earnings growth profile, profitability, industry characteristics, market cap and specific risks. This tailored benchmark is more informative than a simple peer or industry comparison because it adjusts for Vallourec’s own fundamentals rather than assuming all companies deserve the same multiple. With the shares trading well below the 14.5x Fair Ratio, the PE based view points to a stock that is still undervalued by the market.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1440 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Vallourec Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of Vallourec’s story with the numbers that sit behind a fair value estimate.

A Narrative on Simply Wall St is your own investment storyline, where you describe how you think Vallourec’s business will evolve and then translate that view into assumptions for future revenue, earnings and margins. Together these produce a Fair Value that you can directly compare to today’s share price to decide whether to buy, hold or sell.

Because Narratives are built into the Community page on Simply Wall St, millions of investors can quickly create, adjust and share these story driven forecasts. They are automatically updated as new information, like quarterly earnings or major contract announcements, flows in.

For example, some Vallourec investors currently anchor their Narrative on offshore contracts and US expansion driving higher margins and a Fair Value above €22.6. More cautious investors focus on oil and gas dependence, FX risk and competition, leading them to Narratives that point to a Fair Value closer to €18.8.

Do you think there's more to the story for Vallourec? Head over to our Community to see what others are saying!

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