Is Shell Poised for Further Growth After Recent Quarterly Rebound?

Thinking About Shell Stock?

Shell stock has always been a topic for lively debates. Should you buy, hold, or cash out? If you have been watching your portfolio lately or eyeing energy stocks for the first time, you already know Shell is not just another ticker on the London Stock Exchange. The past few months have brought some notable movements: after a mild dip last week, Shell has rebounded roughly 1% in the last 30 days and is up more than 7% over the past quarter. Looking further back, the story gets even more interesting, with a nearly 29% three-year return and a remarkable 186% climb over five years. Clearly, investors have seen both growth potential and shifting risk sentiment, especially as energy markets respond to global supply changes.

When it comes to value, Shell currently trades at a 13.7% discount to analyst price targets, and an even steeper 60.2% discount to its intrinsic value. Still, valuation is a puzzle, and everyone has a different way of solving it. Our value score, which is a simple tally based on six classic checks of whether a company is undervalued, lands Shell at a 3 out of 6. There is no clear verdict yet, but it definitely invites a closer look.

So how does Shell stack up when you look under the hood, method by method? Let’s break down the key approaches for measuring a stock’s value. Stick around because I’ll share my favorite lens for seeing what numbers alone sometimes miss.

Shell delivered 1.2% returns over the last year. See how this stacks up to the rest of the Oil and Gas industry.

Approach 1: Shell Cash Flows

A Discounted Cash Flow (DCF) model estimates what a company is truly worth by projecting how much cash it will generate in the future and then discounting those amounts back to today’s value. It is a popular yardstick for judging whether a stock trades above or below its “intrinsic” value.

Shell’s latest reported Free Cash Flow stands at just over $30.5 billion. Analysts forecast a steady, though not explosive, growth pattern, with annual Free Cash Flow projected to reach roughly $31.5 billion in a decade. By running these future estimates through a two-stage DCF model, factoring in both current performance and likely future trends, Shell’s intrinsic value is calculated to be £66.72 per share.

Compared with its current price, this valuation suggests Shell stock is trading at a significant 60.2% discount to intrinsic value. This means it is 60.2% undervalued by this method. In other words, the market is pricing Shell well below the level that future cash flows and prudent discounting would imply.

Result: UNDERVALUED

Our DCF analysis suggests Shell is undervalued by 60.2%. Track this in your watchlist or portfolio, or discover more undervalued stocks based on DCF analysis.

Approach 2: Shell Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used metric for valuing profitable companies like Shell. Since the PE ratio compares a company’s share price to its earnings per share, it helps investors gauge how much the market is willing to pay for each pound of profit. Companies with strong, stable profits, particularly in sectors such as oil and gas, are often assessed using this measure because it reflects both their past performance and future earning power.

However, what counts as a “normal” PE ratio can vary. Growth expectations and risks both play a role. Companies expected to expand rapidly or take on less risk often trade at higher PE multiples, while mature or more volatile companies tend to have lower ratios. For Shell, the current PE ratio stands at 15.4x. This is slightly above the peer average of 14.5x and considerably above the broader oil and gas industry average of 11.3x. This suggests the market sees Shell as somewhat more attractive than its average peer, possibly due to its scale, profitability, or future prospects.

To gain deeper insight, we use Simply Wall St’s proprietary Fair Ratio, a tailored benchmark that factors in Shell’s growth, margins, and sector trends. Shell’s Fair PE Ratio is calculated at 17.5x. Since the actual multiple is slightly lower than this, it implies that Shell’s shares are fairly priced by this method, with a potential small discount for investors seeking some margin of safety.

Result: ABOUT RIGHT

PE 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 Shell Narrative

Numbers alone do not tell the full story. This is why Narratives offer a dynamic, user-friendly way to make smarter investment decisions. A Narrative is your interpretation of a company’s journey—a story you build using your perspective on Shell’s future, your expectations for revenue, profits, margins, and ultimately, your idea of what fair value looks like.

Each Narrative connects the dots between Shell’s business story, a financial forecast, and a final estimated fair value. On the Simply Wall St platform, Narratives make it easy to express your reasoning, visualize outcomes, and join a community where millions of investors share and compare strategies.

This approach empowers you to decide when to buy or sell by contrasting your Fair Value against today’s share price. Real-time updates factor in new developments such as earnings releases or breaking news. For example, one investor may believe Shell is worth £39.20 if LNG expansion succeeds and margins rise sharply, while another might set fair value at £26.95, expecting global price risks and a slow energy transition to limit upside.

With Narratives, you are no longer limited to static numbers. You can incorporate fresh information, test assumptions, and stay in control of your investment decision every step of the way.

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