Primo Brands (PRMB): Evaluating Valuation After Recent Share Price Declines

Primo Brands (PRMB) has caught some attention after a run of challenging months for the stock, with shares drifting down nearly 39% over the past 3 months. Investors are wondering if the current price reflects an opportunity or risk as they evaluate the company’s latest results and market positioning.

See our latest analysis for Primo Brands.

After a difficult year that saw Primo Brands’ share price fall over 53% year-to-date, recent heavy declines reflect fading momentum as investors reassess both growth prospects and risk. Still, while short-term price returns have disappointed, the stock’s three- and five-year total shareholder returns tell a more stable, if muted, longer-term story.

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With the share price now well below analyst targets and recent results showing some underlying growth, the key question is whether Primo Brands is undervalued at these levels or if the market has already priced in its future potential.

Price-to-Sales of 0.8x: Is it justified?

Primo Brands is trading at a price-to-sales ratio of just 0.8x, which puts it well below both peers and the broader industry averages. At the last close of $14.46, this signals the market is factoring in muted expectations and subdued growth outlooks for now.

The price-to-sales ratio measures the company's market capitalization relative to its annual revenues, and is a common metric for evaluating fast-evolving or unprofitable businesses where earnings alone may not provide the full story. For beverage stocks like Primo Brands, sales multiples offer an early window into how investors assess potential growth, margins, and overall sector positioning, especially when profits are not yet consistent.

Trading at 0.8x sales means Primo Brands is priced well below the US Beverage industry average of 2.1x as well as the peer average of 2.6x. When compared to the estimated fair price-to-sales ratio of 1.1x, the company's current multiple suggests meaningful upside should market sentiment or fundamentals improve. The gap to both the industry and fair ratio underlines how conservative expectations are at present and where re-rating could occur if the outlook shifts.

Explore the SWS fair ratio for Primo Brands

Result: Price-to-Sales of 0.8x (UNDERVALUED)

However, sustained net losses and inconsistent revenue growth could limit any near-term upside, especially if industry sentiment remains cautious or if expectations worsen further.

Find out about the key risks to this Primo Brands narrative.

Another View: SWS DCF Model Shows Much Larger Upside

While the price-to-sales multiple makes Primo Brands look attractively valued, our SWS DCF model suggests an even bigger disconnect. Based on this method, shares at $14.46 are trading well below an estimated fair value of $82.92. This creates a dramatic valuation gap.

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 Primo Brands 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 870 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 Primo Brands Narrative

If you want a different perspective or simply like digging into the details yourself, try building your own take in just a few minutes, and Do it your way.

A great starting point for your Primo Brands research is our analysis highlighting 3 key rewards and 1 important warning sign 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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