Is Macy's Stock Attractive After 38.9% Rally and Buyout Rumors in 2025?

• If you have ever wondered whether Macy's stock might be undervalued in today's market, you are not alone. The buzz has never been louder around its price versus its potential.
• After a strong 38.9% gain in the past year, and an impressive 11.7% jump in just the last week, Macy's has definitely caught investors' attention.
• Market chatter has picked up since reports emerged about potential buyout offers and renewed retailer optimism, fueling both curiosity and speculation. As department stores face shifting consumer habits, Macy’s news coverage highlights both opportunities and fresh challenges for the brand.
• Macy’s scores a 3 out of 6 on our valuation checks, suggesting there are reasons to dig deeper. Let’s break down how different valuation methods rate Macy's, and stick around because the most powerful way to look at value might surprise you at the end.

Macy's delivered 38.9% returns over the last year. See how this stacks up to the rest of the Multiline Retail industry.

Approach 1: Macy's Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a common method for estimating a company's value by projecting its future cash flows and then discounting those cash flows back to their present value. It offers a forward-looking view based strongly on potential earnings, instead of focusing solely on current financials.

For Macy's, the current Free Cash Flow (FCF) stands at $457.7 million. Analysts provide cash flow projections for up to five years, and estimates for subsequent years are then extrapolated. Over the next decade, Macy's FCF is projected to grow, with estimates suggesting it could reach around $464 million by 2035. These forecasts are based on analyst expectations and systematic extrapolation of likely trends, reflecting a relatively steady financial picture for the brand.

Based on this analysis, the DCF model calculates Macy's fair value at $20.01 per share. However, when compared to its current stock price, the intrinsic discount suggests the stock is approximately 11.8% overvalued. This indicates that the current market price is higher than what these modeled future cash flows would justify.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Macy's may be overvalued by 11.8%. Discover 915 undervalued stocks or create your own screener to find better value opportunities.

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

Approach 2: Macy's Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation metric for profitable companies like Macy's because it reflects how much investors are willing to pay today for each dollar of current earnings. For businesses with consistent profits, the PE ratio helps gauge if a stock is expensive or cheap relative to its profits.

The "right" or fair PE ratio depends on factors including expectations for earnings growth and the company’s risk profile. Generally, high growth and low risk justify a higher PE, while slower growth or heightened risk would see a lower multiple as fair.

Macy's currently trades at a PE ratio of 12.2x. This figure sits well below the industry average of 20.0x and the peer average of 23.1x. This might suggest undervaluation at first glance. However, direct comparisons to industry or peers do not account for Macy’s specific circumstances, such as its moderate growth expectations, margins, and exposure to retail sector risks.

Simply Wall St's "Fair Ratio" provides a more personalized benchmark by considering factors like Macy's own growth potential, profit margins, industry standards, risks, and even the company’s market cap. For Macy’s, the Fair Ratio is 16.8x. This approach is more reliable than standard peer comparisons because it is tailored to Macy’s unique financial and business profile.

With Macy’s actual PE ratio at 12.2x and its Fair Ratio at 16.8x, the stock appears undervalued by this measure. Investors may be paying less than expected for each dollar of earnings when all company-specific factors are considered.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1441 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Macy's Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is the story behind the numbers, describing a user’s personal perspective on a company’s future and supported by their own fair value, revenue, earnings, and margin assumptions.

Narratives link Macy's unique business story to a specific financial forecast and then map that directly to a fair value estimate. Instead of looking only at historical data or consensus estimates, Narratives allow you to lay out your reasoning, make your own calls on growth, and see the financial impact all in one place.

Accessible and simple to use, Narratives are available for millions of investors on Simply Wall St’s Community page, letting anyone easily compare their outlook with others. By measuring your Narrative’s Fair Value against the current stock price, you can quickly decide if now is the right time to buy, sell, or wait.

The best part is that Narratives update dynamically as new news or earnings data emerges, so your investment thesis can stay relevant and informed. For example, some investors have Narratives valuing Macy’s as high as $24.43 per share thanks to its real estate assets and digital growth, while others see fair value as low as $6.00 per share based on persistent store closures and fading profit margins.

For Macy's, we will make it really easy for you with previews of two leading Macy's Narratives:

🐂 Macy's Bull Case

Fair Value: $24.43

Percent undervalued: -8.5%

Revenue Growth Rate: 5.57%

• Macy’s owns significant real estate, which could be monetized to provide liquidity, pay down debt, and fund new investments, with plans to raise $600 to $750 million over the next three years.
• The company is one of the largest US e-commerce players, boasting more than $7 billion in annual digital sales and developing a media network to capitalize on online traffic.
• Risks include ongoing store closures and lack of proven turnaround progress; shares could fall if buyout offers do not materialize and the company has not returned to previous highs in sales or margins.

🐻 Macy's Bear Case

Fair Value: $17.32

Percent overvalued: 29.1%

Revenue Growth Rate: -6.18%

• Recent investments in omni-channel experiences, store optimization, and private labels aim to broaden Macy’s customer base, improve margins, and support modest revenue growth.
• The company remains exposed to risks from e-commerce competition, margin pressures, dependence on discretionary spending, and lagging digital progress.
• Analyst consensus sets a fair value below the current share price, with expectations of shrinking revenues, only modest margin expansion, and a PE ratio that remains well under industry norms.

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