How Attractive Is Baxter After a 21% Weekly Drop and Strategic Divestitures in 2025?

• Ever wondered if Baxter International is trading for less than its true worth? You're not alone, and that's exactly what we're here to explore.
• The stock has been under significant pressure lately, dropping 21.4% over the past week and 37.8% year-to-date. This has added to speculation about its value and risk.
• In recent weeks, headlines have focused on Baxter's divestitures and its strategic shift toward streamlining its core medical products business. News of these company moves has sparked a reaction among investors and is reshaping the narrative around Baxter, making this a key time to revisit what the stock is worth.
• Based on our checks, Baxter International scores 5 out of 6 for being undervalued, which you can see for yourself here. Let's break down how we arrive at that score using different valuation methods, and stick around for a smarter way to look at value coming at the end.

Find out why Baxter International's -48.0% return over the last year is lagging behind its peers.

Approach 1: Baxter International Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's value by projecting its future cash flows and discounting them back to today's dollars, providing an intrinsic value based on expected performance rather than market sentiment.

For Baxter International, the model uses a 2 Stage Free Cash Flow to Equity approach. The company's latest reported Free Cash Flow stands at $267 million. Looking ahead, analysts project steady growth in Baxter's cash generation, with Free Cash Flow expected to reach $943 million by 2027. Over the next decade, further projections extrapolated beyond 2027 suggest a gradual climb, with Free Cash Flow reaching around $1.44 billion by 2035, according to Simply Wall St's modeled estimates.

All these future cash flows are discounted back to their present value, accounting for the time value of money and risk. The outcome is a DCF-derived fair value for Baxter International of $30.86 per share. At its current trading levels, this suggests the stock is about 41.0% undervalued compared to its intrinsic value.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Baxter International is undervalued by 41.0%. Track this in your watchlist or portfolio, or discover 841 more undervalued stocks based on cash flows.

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

Approach 2: Baxter International Price vs Sales

The Price-to-Sales (P/S) ratio is commonly used to value companies in industries like medical equipment, where profitability can fluctuate but sales provide a consistent measure of the business’s scale and reach. For profitable companies, the P/S ratio helps investors assess how much they are paying for each dollar of revenue, which is a critical consideration when comparing across peers and over time.

Generally, higher growth expectations or lower risk justify a higher P/S multiple, while slower growth or greater risk push the fair multiple down. For Baxter International, the company currently trades at a Price-to-Sales ratio of 0.85x. This stands in stark contrast to the industry average of 2.76x and the peer average of 4.10x, indicating that the stock is currently valued much lower than its most relevant benchmarks.

Simply Wall St’s proprietary "Fair Ratio" for Baxter comes out to 1.30x. Unlike industry or peer comparisons alone, the Fair Ratio accounts for a company’s specific growth prospects, risk factors, profit margins, market cap, and the nuances of its industry. This makes it a smarter and more tailored benchmark for assessing valuation, especially when company-specific shifts or macro headwinds are in play.

Comparing Baxter’s current P/S multiple of 0.85x to its Fair Ratio of 1.30x, the stock appears significantly undervalued relative to its fundamentals and potential.

Result: UNDERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1412 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Baxter International Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a story you create about a company, connecting your expectations for its future revenue, profits, and margins with your own idea of what the stock should be worth.

Instead of just focusing on raw numbers or relying solely on analyst targets, Narratives allow you to make your assumptions explicit. Think of it like choosing your own adventure in investing. Each Narrative links what you believe about Baxter International’s business, industry changes, and risks to a detailed financial forecast, which then leads to your Fair Value for the stock.

This approach isn’t just for finance experts. A Narrative is easy to build and track using Simply Wall St’s Community page, where millions of investors share and debate their stories in real time.

Using Narratives can help you decide more confidently when a stock is a buy or a sell, as you will see your Fair Value update automatically whenever new information comes in, like earnings reports or company news.

For example, some investors are optimistic about Baxter’s recovery and see upside to $47, while others remain cautious with a target as low as $19. Your Narrative puts you in control of which story, forecast, and value you trust most.

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