Should Investors Reassess Flowserve After Its Recent 4.5% Weekly Jump?

Deciding what to do with Flowserve stock right now? You're not alone; plenty of investors are eyeing this industrial stalwart, weighing whether the recent moves mean it is a buy, hold, or better left alone. While Flowserve closed at $52.66, it has kept investors guessing all year, with the share price jumping 4.5% in the last week but still down 8.2% year to date. Over longer periods, however, the uptrend is impressive. Even after a recent 6.6% dip over the past month, Flowserve is up 1.9% in the past year and has more than doubled investors’ money over three and five years, gaining 99.7% and 105.6%, respectively.

What’s sparking these changes? Industry news around Flowserve’s ongoing push into sustainable solutions has fueled optimism about its growth in key energy and water management markets. Recent contracts and positive headlines in the industrials sector have helped bolster confidence, even as some market swings reflect changing risk perceptions about the global economy.

But here's where it gets interesting for value seekers: Flowserve earns a value score of 6, checking all six boxes that analysts use to spot undervalued stocks. That puts it in rare company and suggests there is something fundamentally appealing about the current price levels. Next, let’s dig into the different methods analysts use to size up Flowserve’s valuation, and stay tuned because an approach coming up could provide an even clearer answer at the end.

Why Flowserve is lagging behind its peers

Approach 1: Flowserve Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's value by predicting its future cash flows and discounting them back to their value today. For Flowserve, this approach gives investors a clearer look at what the market may not be pricing in, especially when it comes to future profitability.

Right now, Flowserve’s free cash flow stands at $401 million. Analyst estimates suggest this figure will grow steadily, reaching $598 million by the end of 2029. While the first five years rely on analyst projections, forecasts beyond that are extrapolated using standard modeling methods. This future growth matters because, according to the DCF, these expanding cash flows boost the company’s fundamental value over time.

Using the DCF approach, Flowserve’s intrinsic value is pegged at $77.94 per share. This is a substantial 32.4% above the current price of $52.66, indicating the model sees the stock as significantly undervalued at these levels.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Flowserve is undervalued by 32.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Flowserve Price vs Earnings

The price-to-earnings (PE) ratio is a favored metric for valuing profitable companies like Flowserve because it connects the current share price with the company’s earnings power. Investors often use the PE ratio to judge how much they’re paying for each dollar of a company’s profit. Generally, the “right” or “fair” PE ratio will depend on growth expectations and risk. Higher growth or lower risk tends to justify a higher PE ratio, while more risk or slower growth justifies a lower number.

Flowserve’s current PE ratio stands at 23.6x. Compared to the Machinery industry average of 24.7x and the average of its listed peers at 31.8x, Flowserve is trading at a discount, suggesting it could be attractively valued relative to the market and its competitors.

However, Simply Wall St’s proprietary “Fair Ratio” provides a deeper perspective. This Fair Ratio is based on a blend of factors like Flowserve's expected earnings growth, industry trends, profit margins, company size, and specific risks. It suggests the company should trade at a 32.1x multiple. This custom approach is more reliable than simply comparing to peers or industry averages, as it factors in both what makes Flowserve unique and what investors are demanding in the current market.

Since Flowserve’s actual PE ratio (23.6x) is notably below its Fair Ratio (32.1x), the stock appears undervalued using this lens.

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 Flowserve Narrative

Earlier, we mentioned there is an even better way to understand a company’s value. Let’s introduce you to Narratives, an innovative approach that combines your personal perspective on Flowserve’s story with financial forecasts to arrive at a fair value.

A Narrative is more than just a chart or a number. It is the unique story you believe about Flowserve’s future, expressed through your own assumptions about how revenues, earnings, profit margins, and risks will change over time. Narratives help you make sense of why a stock might be worth more or less by connecting the dots between where you see the business heading and what that means for its value today.

On Simply Wall St’s Community page, Narratives make it easy for anyone, whether you are a beginner or a seasoned investor, to create and share their view on Flowserve and see how that stacks up against market expectations or other investors’ beliefs.

What makes Narratives even more powerful is their ability to update automatically whenever major news or results are released. This way, your estimates stay relevant and your decisions are always based on up-to-date information.

• For example, some investors tracking Flowserve believe its fair value could reach as high as $76.0 if recurring revenues in clean energy and digital services develop strongly.
• Others, more cautious about project execution risks, see a fair value closer to $60.0 based on conservative earnings forecasts.

With Narratives, you can compare your fair value to Flowserve’s current price and decide confidently when the stock fits your investment goals and outlook.

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