Is Shell (LSE:SHEL) Undervalued? A Closer Look at Its Latest Valuation Narratives

Shell (LSE:SHEL) shares have been steady in recent days, with the stock down just under 3% over the past day and nearly flat for the week. For a longer-term view, Shell’s month and past 3 months returns suggest resilience, especially given ongoing shifts in the energy sector.

See our latest analysis for Shell.

Looking at the bigger picture, Shell’s share price is up 6.7% year-to-date, while its one-year total shareholder return stands at 8.4%. Despite recent dips, momentum remains positive for longer-term investors. The multi-year total return shows the stock’s ability to weather cycles and deliver for shareholders.

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That raises the question: with Shell trading below many analysts’ targets and showing solid long-term returns, is the company currently undervalued, or is future growth already reflected in the share price?

Most Popular Narrative: 12.8% Undervalued

Shell's most widely followed narrative places fair value at £30.92 per share, about 13% higher than the recent close of £26.96. This spread points to market skepticism despite strong case-building from the consensus.

Shell's significant and growing investment in LNG, highlighted by the start-up and ramp-up of LNG Canada and new projects in Egypt and Trinidad & Tobago, positions the company to benefit from steadily rising global energy demand and LNG's role as a transition fuel. This is likely to drive long-term top-line revenue growth and support future earnings as Shell's LNG portfolio expands and gains more trading flexibility in key markets.

Read the complete narrative.

Want a behind-the-scenes look at the assumptions powering this double-digit upside? The narrative leans on a future earnings leap, stronger margins, and a new profit multiple. Discover how analysts justify a higher future value and what could surprise investors along the way.

Result: Fair Value of £30.92 (UNDERVALUED)

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

However, persistent weakness in chemicals and heavy cash outflows to shareholders could threaten Shell’s long-term margin improvements. This casts uncertainty on its future upside.

Find out about the key risks to this Shell narrative.

Another View: A Look at Market Multiples

On the flip side, a glance at Shell’s current price-to-earnings ratio of 15.4x reveals that it is more expensive than both its industry average of 13.5x and its peer group at 14.8x. However, when measured against the fair ratio of 21.3x, Shell appears to offer room for a market rerating. Does the higher trading multiple signal a premium worth paying, or does it raise the risk for new buyers waiting for a better entry point?

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

Build Your Own Shell Narrative

If you want to dig into the numbers and draw your own conclusions, setting up a personal narrative takes just a couple of minutes. Do it your way

A great starting point for your Shell research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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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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