Is Veolia Environnement Attractively Priced After Strategic Water Services Expansion?

• Thinking of jumping into Veolia Environnement but wondering if you’d be getting good value for your money? You’re not alone, and we’re about to break it down for you.
• Even with their stock up 82.1% in the last 5 years, Veolia has seen a slight dip recently, dropping 2.0% over the past week and 4.1% over the last month. The stock has still managed a steady 7.1% gain in the past year.
• Recent news has been interesting, with Veolia garnering attention for its strategic acquisitions and expansion of water services, both in Europe and globally. These moves have contributed to investor optimism but also added new factors for the market to weigh.
• On our value checklist, Veolia scores a strong 5 out of 6, suggesting it could be undervalued in multiple ways. Next, we will dig into the different valuation approaches used. Stick around because we will also highlight a more powerful way to look at value by the end of the article.

Find out why Veolia Environnement's 7.1% return over the last year is lagging behind its peers.

Approach 1: Veolia Environnement Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a fundamental valuation approach that estimates a company's worth by projecting its future free cash flows and then discounting them back to today's value. This gives investors a sense of the business's intrinsic value based on its long-term earning potential.

For Veolia Environnement, the latest trailing twelve months free cash flow stands at €1.95 billion. Using the 2 Stage Free Cash Flow to Equity DCF model, analysts have provided cash flow estimates for the next five years, with further projections extrapolated by Simply Wall St up to 2035. By 2027, Veolia's free cash flow is projected to reach €2.03 billion, and in ten years, the estimate is approximately €2.33 billion.

Applying these projections, the model values Veolia's intrinsic worth at €61.16 per share. Compared to the current share price, this implies the stock is trading at a substantial 53.4% discount to its intrinsic value, which suggests it is undervalued at present.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Veolia Environnement is undervalued by 53.4%. Track this in your watchlist or portfolio, or discover 921 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 Veolia Environnement.

Approach 2: Veolia Environnement Price vs Earnings

For companies like Veolia Environnement that are profitable and generate positive earnings, the Price-to-Earnings (PE) ratio is a tried-and-true valuation method. The PE ratio helps investors quickly assess how much they are paying for each euro of earnings, making it easier to gauge value compared to similar businesses.

Growth expectations and perceived risks in a company play a big role in what is considered a "normal" or "fair" PE ratio. Companies expected to grow faster or seen as less risky can typically sustain higher PE multiples, while slower growers or riskier firms might trade at a discount.

Currently, Veolia’s PE ratio stands at 17.2x. This closely matches the average PE ratio of other integrated utilities in its industry, which is 17.8x, and is just below the peer group average of 19.2x. These comparisons suggest the market views Veolia’s earnings potential as generally in line with its industry and peers.

To get a more customized view, Simply Wall St calculates a "Fair Ratio" for Veolia. This figure is 17.2x. The Fair Ratio goes further than simple averages, taking into account Veolia’s growth outlook, profit margin, industry context, company size, and any relevant risks. This makes it a more holistic benchmark for determining true value.

Since Veolia’s actual PE ratio is nearly identical to its Fair Ratio, this suggests the stock is trading at about the value you would expect based on its unique fundamentals and outlook.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1421 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Veolia Environnement Narrative

Earlier we mentioned there is an even better way to understand valuation, so let’s introduce you to Narratives, a more dynamic and insightful approach to deciding when to buy or sell Veolia Environnement.

A Narrative is simply your story about the company, connecting your views on Veolia’s future (like how much its revenues, earnings, and margins might grow) directly to a fair value calculation. Instead of relying just on preset models or analyst averages, Narratives empower you to personalize the numbers behind your investment thesis and see how your perspective stacks up with others.

On Simply Wall St’s Community page, you can set up your own Veolia Narrative in minutes. Millions of investors already use this easy tool to link the company’s story, such as growth from global water demand or risks from tougher market conditions, into transparent forecasts and a fair value tailored to their expectations.

This makes your decisions smarter and more actionable: by comparing your Fair Value to the current share price, you can see at a glance if it’s time to buy, hold, or sell. Each Narrative automatically updates as new news or earnings are released, so your thesis always stays current.

For example, recent analyst Narratives for Veolia range from a bullish €45.3 fair value (for investors counting on strong technology-driven growth and margin expansion) to a more cautious €25.3 (focused on operational risks and slowing mature market growth), highlighting how Narratives adapt to different viewpoints and market signals.

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

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