Is Interface (TILE) Still Attractive After A 235% Three Year Share Price Surge

• If you are wondering whether Interface at around US$31.64 still offers value after a strong run, you are not alone. This article will focus on what the numbers say about its current price tag.
• The share price has pulled back about 3.7% over the last week, while the 1 year return sits at 61.7% and the 3 year return is a very large 235.1%. This naturally raises questions about how much upside or risk is now priced in.
• Recent coverage of Interface has focused on its position in commercial flooring and how investors are reacting to the company in that context, which helps frame these share price moves. This backdrop is important as we look at whether the current market enthusiasm is aligned with the underlying valuation.
• On Simply Wall St's 6 point valuation checklist Interface scores 5 out of 6. Next we will compare what different valuation approaches suggest about the stock today, before finishing with a way to think about value that can give you an even clearer picture.

Interface delivered 61.7% returns over the last year. See how this stacks up to the rest of the Commercial Services industry.

Approach 1: Interface Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes the cash that a company is expected to generate in the future and discounts those amounts back to today to estimate what the business might be worth right now.

For Interface, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $130.9 million. Simply Wall St then projects free cash flow out to 2035, starting with $140.97 million in 2026 and reaching $209.13 million in 2035, and discounts each of those yearly figures back to today using its own assumptions.

Adding those discounted cash flows together, along with values beyond the explicit forecast period, produces an estimated intrinsic value of about US$70.28 per share. Compared with a recent share price around US$31.64, the DCF outcome implies roughly a 55.0% discount, which in this model indicates that the stock is undervalued.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Interface is undervalued by 55.0%. Track this in your watchlist or portfolio, or discover 54 more high quality undervalued stocks.

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

Approach 2: Interface Price vs Earnings (P/E)

For a profitable company like Interface, the P/E ratio is a straightforward way to see how much you are paying for each dollar of earnings. Investors usually accept a higher P/E when they expect stronger growth or see lower risk in those earnings, and a lower P/E when growth expectations are more modest or risks look higher.

Interface currently trades on a P/E of 15.91x. That sits below the Commercial Services industry average of 25.87x and also below the peer group average of 26.83x, which indicates the market is putting a lower earnings multiple on Interface than on many comparable companies.

Simply Wall St also calculates a proprietary “Fair Ratio” of 19.71x for Interface. This metric is designed to estimate the P/E you might expect given the company’s earnings growth profile, profit margins, industry, market cap and specific risks. Because it blends these factors rather than just lining Interface up against broad industry or peer averages, it can provide a more tailored sense of what looks reasonable for this stock. Comparing the Fair Ratio of 19.71x with the actual P/E of 15.91x indicates that the shares are undervalued on this measure.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Interface Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St's Community page you can use Narratives, where you write a clear story about Interface, tie that story to your own forecasts for future revenue, earnings and margins, and link those forecasts to a fair value. You can then compare that fair value with the current share price, all in a tool that updates as new news or earnings arrive. One investor might see Interface as a higher conviction idea closer to the upper analyst fair value of about US$36.33, while another might anchor nearer the lower analyst target of US$30.00, yet both can track how their story, numbers and valuation evolve over time.

Do you think there's more to the story for Interface? Head over to our Community to see what others are saying!

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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