Where Does Shell Stand After Its £2 Billion Buyback Announcement in 2025?

If you have watched Shell stock recently, you may have questions about where it is heading and whether now is a good time to make a move. Investors considering Shell’s prospects have witnessed both steady long-term growth and short-term volatility. Over the past week, Shell recorded a 0.3% gain on its share price. Looking at the last year, the stock has climbed 7.2%. For an even longer view, the returns are significant, with a 227.6% gain over five years.

This kind of performance does not happen in isolation. Market shifts, ranging from changing energy policies to the global transition towards renewables, have added complexity to an already turbulent sector. While the past month saw a modest dip of 1.7%, the overall 4.7% increase for the year-to-date suggests that Shell continues to navigate industry challenges, potentially turning risk perception into opportunity.

Despite these fluctuations, the question remains whether Shell is actually undervalued. Analyzing six key valuation checks, Shell appears undervalued in 4 out of 6 categories, which hints at potential that may not be immediately obvious.

If you are weighing what all these numbers mean, you are not alone. Here is a breakdown of the valuation methods that analysts use to assess Shell, followed by a perspective on what the company’s shares might really be worth.

Why Shell is lagging behind its peers

Approach 1: Shell Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's true worth by projecting its future cash flows and discounting them back to today’s value. For Shell, this process starts with current Free Cash Flow, which stands at $30.6 billion. By forecasting cash flows annually and adjusting for their present value, the DCF model provides a long-term look at the business’s earning power.

Over the next five years, analyst estimates anticipate some fluctuation; however, overall Free Cash Flow is expected to remain robust, with a projection of $26.7 billion in 2029. Simply Wall St further extrapolates these forecasts out to 2035. The calculations use a two-stage Free Cash Flow to Equity model, reflecting both the estimated growth phase and a stable phase thereafter.

Based on this model, Shell's intrinsic value comes out to $51.23 per share. With the current market price nearly 48.4% below this level, the DCF suggests Shell stock is significantly undervalued.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Shell is undervalued by 48.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Shell Price vs Earnings

The Price-to-Earnings (PE) ratio is widely used for valuing profitable companies because it ties a company’s market price directly to its earnings, making it a straightforward way to assess value. For businesses like Shell that generate consistent profits, the PE ratio helps investors gauge whether the stock is reasonably priced compared to its ability to deliver future gains.

It is important to note that what counts as a “fair” PE ratio depends on factors like earnings growth, risk, and how the industry is evolving. Fast-growing or less risky companies tend to justify higher PE ratios, while slower growth or greater uncertainty generally means lower multiples are appropriate.

As of now, Shell is trading at a PE of 15.3x, almost identical to the average of its major peers at 15.4x, and well above the broader oil and gas industry average of 11.5x. However, Simply Wall St’s proprietary Fair Ratio, which factors in Shell’s earnings outlook, profit margin, market cap, and risks, is 17.1x. This means Shell is currently trading slightly below what would be expected when considering the full picture of its business and prospects.

The Fair Ratio is a more complete benchmark than peer or industry averages because it weighs company-specific traits along with broader market forces. It recognizes that no two companies are identical, even within the same sector.

Result: UNDERVALUED

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

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is simply your personal story or big-picture perspective on a company, shaped by your assumptions about its future revenue, earnings, and profit margins, which together form your own view of what the company is really worth.

With Narratives, investors connect the dots between company news, forecasts, and financials by creating a transparent path from their outlook on Shell's business to a fair value for its shares. This approach is easy to use on Simply Wall St's Community page, where millions of investors build and share their Narratives, making this powerful tool accessible to all experience levels.

What sets Narratives apart is their dynamic nature; they update automatically as new information, like earnings reports or breaking news, comes in, ensuring your view always reflects the latest reality. Narratives make it straightforward to compare your Fair Value with the current Price, helping you make smarter, more confident buy or sell decisions based on your unique perspective.

For example, right now the most optimistic Shell investors see a Fair Value as high as £39.36, while the most cautious expect just £27.06. This shows how Narratives capture the full range of opinions and let you decide which story and valuation make the most sense for you.

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.

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