Does Gen Digital’s Recent Dip Signal a Compelling Entry Ahead of 2025?

If you are holding Gen Digital stock or thinking about adding it to your portfolio, you are not alone in weighing your options right now. The stock closed at $27.75 the other day and, despite a recent dip of -3.6% over the past week and a -5.9% slide over the past month, Gen Digital is still up 1.0% year-to-date. The broader picture looks even more compelling; the stock has climbed an impressive 42.4% over the past three years and 45.1% over the last five. That kind of track record keeps both value seekers and growth-oriented investors watching closely for entry and exit points.

Much of the recent momentum in Gen Digital’s share price is not tied to a sudden shift in fundamentals, but rather to evolving market sentiment. Renewed attention to cybersecurity trends and increased demand for digital protection solutions have contributed to this change. This shift in risk perception has led to some volatility, but it has also sparked curiosity about whether the current price accurately reflects Gen Digital’s real value.

Here is where things get interesting: if we use a straightforward valuation scorecard that checks six different ways a company might be undervalued, Gen Digital achieves a perfect 6 out of 6. In other words, on paper, every major method is signaling value potential.

Let’s dig a bit deeper into these valuation methods and what they reveal. As you’ll see near the end of the article, there might be an even smarter way to look at Gen Digital’s true value.

Why Gen Digital is lagging behind its peers

Approach 1: Gen Digital Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting future cash flows and then discounting them back to present value. For Gen Digital, this means taking forecasted Free Cash Flow (FCF) and determining what it is worth in today’s dollars, based on risk and expected growth.

Currently, Gen Digital generates $1.35 Billion in Free Cash Flow. Looking ahead, analysts forecast FCF to reach $1.83 Billion by 2028. Beyond that, projections out to 2035 use a combination of analyst forecasts and calculated estimates, suggesting continued steady annual growth. These long-term estimates help provide a picture of Gen Digital’s potential earnings power over the coming decade, all in $.

Based on this DCF approach, the stock’s intrinsic value is calculated at $44.73 per share. Compared to the recent close of $27.75, this suggests Gen Digital is trading at a 38.0% discount to its underlying value.

This valuation means Gen Digital appears significantly undervalued relative to its projected cash flow trajectory and could offer attractive upside potential for investors at current prices.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Gen Digital is undervalued by 38.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Gen Digital Price vs Earnings

The Price-to-Earnings (PE) ratio is often the go-to metric when evaluating profitable companies like Gen Digital. It gives investors a sense of how much they are paying for each dollar of current earnings, making it particularly useful for established firms that consistently generate profits.

However, the "right" PE ratio isn't a one-size-fits-all number. If a company is expected to grow quickly with stable profits, investors are generally willing to pay a higher PE multiple. On the other hand, higher risk or slower growth typically justifies a lower multiple, even in the same industry.

Gen Digital currently trades at a PE ratio of 28.6x. When compared to the broader software industry average of 36.1x and the peer group’s average of 43.6x, Gen Digital’s multiple looks noticeably lower. While these benchmarks are informative, they do not fully account for Gen Digital’s specific growth outlook, risk profile, profit margins, or size in the market.

This is where Simply Wall St’s "Fair Ratio" comes into play. Unlike simple peer or industry comparisons, the Fair Ratio incorporates a holistic view. It sifts through Gen Digital’s earnings growth potential, industry trends, margin profiles, risk factors, and market capitalization to tailor what a fair PE multiple should be for this company. For Gen Digital, the Fair Ratio lands at 35.8x, notably above the stock’s current 28.6x PE.

Since Gen Digital’s actual multiple is well below the Fair Ratio, this approach suggests the stock is undervalued based on its earnings profile and broader business qualities.

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 Gen Digital Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let's introduce you to Narratives. A Narrative is a way to turn your view or story about a company, such as your expectations for Gen Digital’s future revenue, profit margins, or market position, into a clear set of financial forecasts and an estimated fair value. Instead of relying solely on fixed formulas or consensus analyst opinions, Narratives let you express your unique perspective and see exactly how it impacts your estimate of what the stock is worth today.

By connecting the company’s big picture story, whether it is about AI-driven innovation, new market opportunities, or increased competition, directly to the numbers through a dynamic forecast, Narratives help you make smarter, more personalized investment decisions. They are straightforward and accessible within the Simply Wall St platform’s Community page, where millions of investors already share and compare their perspectives.

With Narratives, you can instantly see how your fair value compares to Gen Digital’s current price, revealing if you think it’s time to buy, sell, or hold. Best of all, Narratives automatically update as new information, like earnings or industry news, is released, so your view always stays relevant.

For example, some investors recently shared bullish Narratives for Gen Digital with fair values as high as $46.0, while others are more cautious, assigning a fair value as low as $25.0. This reflects just how much potential there is to connect your outlook to your investment choices.

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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