A Look at Archer Aviation’s (ACHR) Valuation Following Recent Share Price Decline

Archer Aviation (ACHR) shares have slipped about 30% over the past month, drawing attention from investors curious about what may be driving the move. With year-to-date performance also down, several are weighing possible factors.

See our latest analysis for Archer Aviation.

Archer Aviation’s recent share price slump stands out, especially given its strong one-year total shareholder return of 91.73% and an impressive 219% over three years. While short-term share price returns have cooled and momentum has faded in recent weeks, the company’s longer-term performance still signals that investors remain optimistic about its growth potential despite increased volatility.

If Archer’s story piqued your curiosity, now’s a great time to broaden your search and discover fast growing stocks with high insider ownership

Given the stock’s recent drop and its mixed performance this year, investors are left to wonder if Archer Aviation is trading below its true value or if the current price already reflects expectations for rapid future growth.

Price-to-Book of 3.1x: Is it justified?

Archer Aviation’s shares trade at a price-to-book ratio of 3.1x, which puts them slightly below both the US Aerospace & Defense industry average (3.3x) and the peer average (3.8x). With the stock’s last close at $7.88, this suggests the market currently values Archer a little more conservatively than some sector peers.

The price-to-book ratio compares a company's stock price to its book value, offering insight into how much investors are willing to pay for each dollar of net assets. For high-growth, asset-light businesses in innovative sectors, this multiple can reflect optimism for future intangible value.

With Archer’s ratio below industry and peer benchmarks, investors could be pricing in uncertainties around profitability or the unique risks and rewards in the electric aviation sector. If market sentiment turns, there is room for the multiple to move closer to or above industry norms.

Compared to its peers, Archer’s valuation looks modest by this measure, potentially giving some upside if growth expectations play out. Market shifts could drive the price-to-book ratio higher, reflecting either improved fundamentals or renewed sentiment.

Explore the SWS fair ratio for Archer Aviation

Result: Preferred multiple of price-to-book 3.1x (UNDERVALUED)

However, investors should note that Archer’s negative net income and lack of current revenue could fuel further volatility if profitability takes longer than expected.

Find out about the key risks to this Archer Aviation narrative.

Another View: Discounted Cash Flow Valuation

While the price-to-book ratio points to Archer Aviation as modestly valued against peers, our DCF model comes to a far bolder conclusion. The SWS DCF model currently estimates Archer’s fair value at $34.43, meaning the shares trade more than 77% below this level. By this measure, they look significantly undervalued. But just how much weight should investors put on projections for such an early-stage company?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Archer Aviation for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 886 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Archer Aviation Narrative

If you see things differently or want to dig deeper, you can explore the data yourself and build your own perspective in just a few minutes, Do it your way.

A great starting point for your Archer Aviation research is our analysis highlighting 2 key rewards and 4 important warning signs 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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