Is Axalta Coating Systems Attractive After 16% Decline and Q2 Guidance Cut?

If you’ve been tracking Axalta Coating Systems, you already know that the stock story is anything but dull. Maybe you’re eyeing the shares for a long-term play, or perhaps the recent price swings have you wondering whether to dive in or hold off. Either way, it’s smart to check just how undervalued or misunderstood Axalta really is in today’s market climate.

Let’s set the scene with recent numbers. Axalta’s last close was $28.18, which might not jump out at first glance, but behind that number is a tale of both challenge and opportunity. Over the last week, the stock nudged up a modest 0.6%. However, the past month hasn’t been kind, with the price falling 11.4%, and year-to-date performance sits at -16.0%. For those with a longer memory, the 1-year change is -21.4%. On the flip side, long-term holders have still seen a 32.5% return over three years and a respectable 8.7% over five. Moves like these often follow shifts in market sentiment, whether it’s changing industrial demand, evolving competition, or investor appetite for specialty materials stocks.

Here’s where it gets interesting: based on a value score that looks at six key metrics for undervaluation, Axalta ticks every single box, earning a perfect 6 out of 6. On paper, that’s a rare achievement. But how do each of those valuation checks hold up in practice? Let’s break down the numbers method by method, and stick around because there’s a more nuanced view of valuation you won’t want to miss at the end.

Why Axalta Coating Systems is lagging behind its peers

Approach 1: Axalta Coating Systems Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a classic tool for estimating a company’s intrinsic value by forecasting its future cash flows and discounting them back to their value in today’s dollars. The approach relies on projections of Free Cash Flow (FCF), which is essentially the cash the company generates after all expenses and investments.

For Axalta Coating Systems, the most recent FCF reported stands at $446.8 million. Looking ahead, analyst estimates suggest steady growth, with FCF expected to reach $697 million by the end of 2028. Beyond this five-year window, Simply Wall St extrapolates future performance, and by 2035, projected FCF climbs to just over $1.01 billion, all in US dollars. These forecasts form the foundation of the DCF calculation, which uses a “2 Stage Free Cash Flow to Equity” model suitable for Axalta’s position in the chemicals industry.

Based on these numbers, the DCF model calculates an intrinsic value of $63.48 per share. This represents a significant premium compared to Axalta’s current market price of $28.18, indicating the stock is trading at a 55.6% discount. In other words, the model indicates substantial undervaluation based on long-term cash-generating potential.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Axalta Coating Systems is undervalued by 55.6%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Axalta Coating Systems Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used benchmark for valuing profitable companies like Axalta Coating Systems, because it directly reflects how much investors are willing to pay for each dollar of earnings. A company's PE ratio offers a lens into not just its current profitability but also investor expectations for future growth and how risky the earnings stream might be. Generally, faster-growing or lower-risk companies command higher PE ratios, while those with slower growth or more uncertainty trade at lower multiples.

Currently, Axalta trades at a PE ratio of 13.7x. In comparison, the Chemicals industry average is significantly higher at 26.5x, and peers trade around 21.4x. This suggests that Axalta is valued much more conservatively than others in its sector.

The Fair Ratio, calculated by Simply Wall St, pegs Axalta’s appropriate PE ratio at 19.0x. This proprietary metric stands out because it balances more than just what competitors and industry averages dictate; it also customizes for the company’s earnings growth prospects, profit margins, size, and specific risks. By accounting for these real-world nuances, the Fair Ratio offers a clearer benchmark for what Axalta should be worth today.

Comparing Axalta’s current 13.7x PE to its Fair Ratio of 19.0x shows a meaningful upside, indicating the stock is undervalued based on this approach.

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 Axalta Coating Systems Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. In simple terms, a Narrative is a story that puts your view of a company like Axalta Coating Systems into numbers, outlining your expectations for its future revenue, profit margins, and fair value, while making clear the reasons behind them.

Narratives bridge the gap between a company’s story and the numbers, connecting your insights or thesis about Axalta with detailed financial forecasts and a calculated fair value. This approach transforms investing from simply comparing ratios to making decisions based on your understanding of the business and the numbers you believe in.

On Simply Wall St's Community page, Narratives make this process easy, with millions of investors already using them to capture, update, and share their perspectives. When new news or earnings are released, Narratives update automatically, helping you quickly reassess what fair value means for you.

For example, some investors might believe Axalta can surpass revenue targets with digitalization and global EV adoption, resulting in an optimistic Narrative and a fair value up near $47.00. More cautious users, concerned about weaker volumes and industry headwinds, may estimate a fair value closer to $30.00. Narratives empower you to decide for yourself when Axalta’s price truly signals opportunity or risk, based on your own assumptions, not just the market’s mood.

Do you think there's more to the story for Axalta Coating Systems? 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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