Does Stellantis Offer Opportunity After $10B U.S. Turnaround Investment News?

Are you on the fence about what to do with Stellantis stock right now? If so, you are definitely not alone. Stellantis has had a wild ride lately, with the price dropping 7.2% in just the last week, even after a recent 6.0% bounce over the past month. Year-to-date, the stock is still down a steep 31.5%, and looking at the past year, Stellantis shares have lost 21.6% of their value. That is enough to make anyone question what comes next.

But before you write off this automotive giant, let’s dig beneath those red numbers. Recent headlines may actually hold a clue to some longer-term opportunities. For one, Stellantis is reportedly planning a $10 billion investment to turn around its U.S. operations. This could reshape the company’s future strategy in its most profitable market. At the same time, partnerships are brewing, with Nissan rumored to be in talks with Stellantis for electrified vehicles. In addition, whispers of U.S. tariff relief could eventually favor domestic-centered automakers like Stellantis.

Despite all this action and the dramatic price swings, Stellantis currently scores a 5 out of 6 on our value checklist, signaling that it could be notably undervalued by several measures. That raises a big question: is Wall Street missing the bigger picture?

Let’s take a closer look at the tried-and-true ways investors evaluate companies, from price-to-earnings ratios to cash flow, and see how Stellantis stacks up. Stick around, because we will wrap up with an even smarter approach for understanding what this valuation story really means going forward.

Why Stellantis is lagging behind its peers

Approach 1: Stellantis Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's value by projecting its future cash flows and then discounting them back to their present value. This approach aims to determine what Stellantis is truly worth today, based on its ability to generate cash in the future.

Stellantis currently reports a Free Cash Flow of -€10.9 Billion, reflecting recent operational challenges. However, analysts predict a recovery, with annual free cash flow projected to rise to €5.8 Billion by 2029. Over the next decade, projections see continued steady growth. The farther out these estimates go, the less certain they become, especially since only the first five years are based on analyst forecasts. Beyond that point, Simply Wall St extrapolates future cash flows to complete the analysis.

Based on this cash flow outlook, the DCF model calculates an estimated fair value of €21.75 per share for Stellantis stock. With the current share price trading at a 60.3% discount to this estimate, the stock appears significantly undervalued according to this method.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Stellantis is undervalued by 60.3%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Stellantis Price vs Sales

The Price-to-Sales (P/S) ratio is a widely used metric for valuing companies, especially those with unpredictable earnings or periods of losses. For automotive manufacturers like Stellantis, where large investments and cyclical profits are common, the P/S ratio can help investors focus on the core business scale and sales performance rather than just bottom-line profits.

In general, companies with higher growth prospects or lower risk deserve a higher P/S ratio, while mature or riskier businesses tend to trade at lower multiples. Industry context matters too, as some sectors consistently support higher valuations due to growth or profitability expectations.

Currently, Stellantis trades at a P/S ratio of just 0.17x. To put this in perspective, the auto industry’s average is 0.84x, and peers are even higher at 2.61x. At face value, Stellantis looks remarkably cheap relative to sales compared to both its industry and its closest competitors.

However, Simply Wall St’s proprietary “Fair Ratio” for Stellantis is 0.43x. This measures what multiple Stellantis should command based on its growth outlook, industry characteristics, profit margins, market cap, and specific risks. It improves on simple industry or peer comparisons by building in these company-specific nuances, giving a more accurate fair value point.

Comparing Stellantis’ current P/S ratio of 0.17x to its Fair Ratio of 0.43x shows the stock is trading well below where you would expect given all these considerations, reinforcing the idea that Stellantis may currently be undervalued.

Result: UNDERVALUED

PS 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 Stellantis Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your own story, or perspective, about a company's future, linking its business outlook to your predicted financials and ultimately to your estimate of fair value. Narratives help transform numbers into real-world expectations by tying your beliefs, such as how rapidly Stellantis will grow, what profit margins will look like, and what risks or opportunities will matter most, into one cohesive forecast, all in one place on Simply Wall St's Community page.

This makes it easy to compare your fair value view against the latest share price and directly see if a stock is trading above or below your outlook. This can be a powerful aid for deciding when to buy or sell. Importantly, Narratives are always current and automatically update when fresh news or earnings are released, so you can quickly see how new developments impact your valuations.

For example, some Stellantis Narratives predict strong gains from electrification and international expansion with a fair value above €14 per share, while others anticipate persistently low margins and caution, giving far lower targets near €6. Narratives let you decide which scenario you believe in most and adjust as the story evolves.

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