PPG Industries (PPG): Assessing Valuation After Mixed Earnings and Segment Weakness

If you follow PPG Industries (PPG), the latest round of executive changes may have caught your eye. However, it is the recent earnings results that are creating a buzz among investors. Despite beating revenue expectations, the company’s profit fell and sales declined in its core Global Architectural Coatings and Industrial Coatings segments. This mix of positive and negative results can shift how markets value PPG, raising questions for those holding or considering the stock right now.

While shares edged up 2% over the past week, they lost steam when quarterly earnings showed shrinking bottom-line numbers. PPG Industries is not alone in feeling pressure in materials, but the pullback over the past year has been sharper for this stock, with a 7% drop, alongside a soft 1% year-to-date return. Momentum that once lifted the stock has faded, and investors are weighing whether the revenue surprise is enough to reverse the trend, especially after segment-level weakness.

After this uneven stretch, is the market underestimating PPG's future growth, or is the current price a fair reflection of its earnings risks? Let’s dig into the valuation picture.

Most Popular Narrative: 25% Undervalued

According to the narrative by Dman, PPG Industries is trading significantly below its estimated fair value, with market pessimism potentially overlooking catalysts for future growth. This undervaluation is tied to shifting sector dynamics, portfolio restructuring, and evolving technologies within the coatings industry.

"PPG Industries presents a compelling risk-reward profile for patient investors. Near-term challenges, including cyclical demand softness and restructuring costs, are counterbalanced by strategic investments in high-growth technologies and shareholder-friendly capital allocation. The stock’s 12.7% discount to average price targets and 3.2% dividend yield offer downside protection. Smart windows and digital coatings provide optionality on decarbonization trends."

Why is Wall Street missing the mark on PPG’s true value? The secret sauce driving this valuation comes from a bold mix of future-facing products, ongoing portfolio shifts, and a profit trajectory that defies today’s muted numbers. Ready to uncover which assumptions set up this eye-catching upside? Dive into the full narrative to see what could make PPG the comeback story of the sector.

Result: Fair Value of $152.76 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent input cost pressures and execution risks in portfolio restructuring could quickly challenge the optimistic outlook currently favored by analysts and investors.

Find out about the key risks to this PPG Industries narrative.

Another View: Discounted Cash Flow Indicates Undervaluation Too

Taking a different angle, the SWS DCF model also suggests the stock is priced below its estimated fair value. Both methods indicate a potential opportunity. However, a key question remains: can these calculations hold up if market sentiment shifts?

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 PPG Industries 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 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 PPG Industries Narrative

If you have a different perspective or want to build your own investment story, you can easily craft your own narrative in just a few minutes. So why not do it your way?

A great starting point for your PPG Industries research is our analysis highlighting 4 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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