Assessing Gen Digital’s Outlook in 2025 After 25% Share Price Surge

If you have been wondering what to do with Gen Digital stock, you are not alone. Investors are sizing up whether this cybersecurity software company is set for another run or if it has already had its moment. The stock has seen a healthy boost of 25% over the past year and more than 43% over five years, a sign that perceived risk is easing and growth momentum is building. Gen Digital recently closed at $31.19, with analysts putting the price target around $33.72. This represents an 8% discount and suggests there could still be runway left.

What is driving these moves? Much of the excitement can be traced to improving fundamentals, including annual revenue growth over 5% and net income growth topping 14%. Gen Digital has earned attention with recent market developments that point to its resilience in a rapidly evolving sector. Even in the short term, the last 90 days brought a double-digit gain of over 13% as investors recalibrated their risk expectations for tech stocks like GEN.

Now, the real question: Just how undervalued is Gen Digital? According to a detailed valuation scorecard, it achieves a strong score of 5 out of 6, passing nearly all the checks for undervaluation. But how do these valuation methods actually work, and what are their limits? Let’s break down the approaches analysts use to gauge value, before considering an even richer way to judge whether GEN is truly a buy now.

Gen Digital delivered 25.4% returns over the last year. See how this stacks up to the rest of the Software industry.

Approach 1: Gen Digital Cash Flows

A Discounted Cash Flow (DCF) model offers a systematic way to estimate what a company is truly worth by projecting its future free cash flows and then discounting those back to their present value. This helps investors gauge whether a stock's share price is justified by its ability to generate cash in the years ahead.

Gen Digital’s latest reported Free Cash Flow stands at $1.35 Billion, with projections calling for steady growth. By 2035, analysts expect annual free cash flow to climb to approximately $2.66 Billion, reflecting strong confidence in the company's underlying operations. The DCF model, using these forecasts and a two-stage approach, produces an estimated intrinsic fair value for Gen Digital stock at $46.45 per share.

With a recent closing price of $31.19, the DCF model suggests Gen Digital is trading at a 32.9% discount to its fair value. This indicates the stock appears 32.9% undervalued based on its future cash generation potential.

Result: UNDERVALUED

Our DCF analysis suggests Gen Digital is undervalued by 32.9%. Track this in your watchlist or portfolio, or discover more undervalued stocks based on DCF analysis.

Approach 2: Gen Digital Price vs Earnings

For established, profitable companies like Gen Digital, the Price-to-Earnings (PE) ratio is one of the most widely used tools for comparing value. The PE ratio is attractive because it relates the stock price to actual company profits, giving investors a benchmark for how much they are paying for each dollar of earnings.

Investors often debate what constitutes a “fair” PE, because it should reflect both the company’s future growth expectations and its specific risks. Companies expected to grow faster tend to command higher PE ratios, while those with riskier outlooks or slower growth usually trade at lower multiples.

Currently, Gen Digital trades at a PE ratio of 32.2x. This sits below the broader software industry average of 35.4x and is well under the peer group average of 58.5x, suggesting a conservative valuation relative to other tech peers. Importantly, the “Fair Ratio”, which takes into account Gen Digital’s growth, margins, and risk profile, is calculated at 35.1x. This means Gen Digital’s share price is aligned with its fundamentals and future outlook.

Result: ABOUT RIGHT

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Upgrade Your Decision Making: Choose your Gen Digital Narrative

While traditional valuation tools like the PE ratio help you crunch the numbers, “Narratives” take investing a step further by connecting those numbers to a story that is uniquely yours. A Narrative is simply your perspective on a company, weaving together assumptions about future growth, returns, and risks to create a clear, personal financial forecast and an estimated fair value.

Narratives make decision-making easier by showing how your outlook on Gen Digital translates into real numbers that you can easily compare to the current share price. This approach lets you quickly see whether the stock aligns with your preferences. On the Simply Wall St platform, millions of investors are sharing and updating their Narratives, allowing you to view a range of perspectives and benchmarks that adapt as new news or earnings results are released.

No matter your experience level, Narratives provide a fast and accessible way to connect your thinking to the market. For example, you might believe Gen Digital’s AI-driven growth justifies a fair value of $46 per share, while another investor, concerned about industry shifts, values it closer to $25. Narratives enable you to harness the latest information and community insights, helping you make investment decisions that are smarter and more responsive.

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