Are UPS Shares a Bargain After Dropping 23% in 2025?

• Wondering if United Parcel Service (UPS) stock is trading at a bargain or overpriced? You are not alone, as many are searching for signals while considering an investment in the logistics powerhouse.
• After a volatile stretch, UPS shares have slipped 1.2% over the past month and are down a notable 23.1% year-to-date, raising big questions about future growth and current risk perceptions.
• Recent headlines have spotlighted UPS as the company adapts to shifting e-commerce demand, ongoing labor negotiations, and new competition in the delivery space. These factors are shaping how investors and analysts interpret the latest price dips and swings.
• When it comes to valuation, UPS scores a strong 5 out of 6 on our value checks, suggesting several attractive fundamentals. Before diving into the usual models, let us look at how the numbers stack up and why the real value story might go even deeper by the end of this article.

Find out why United Parcel Service's -21.5% return over the last year is lagging behind its peers.

Approach 1: United Parcel Service Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates the intrinsic value of a company by projecting its future cash flows and discounting them back to today’s dollars. This gives investors a forward-looking sense of what the business is fundamentally worth. This approach is based on real cash generated by UPS rather than accounting metrics or market trends.

For United Parcel Service, the most recent Free Cash Flow stands at around $3.7 billion. Analyst estimates span the next five years, with forecasts for UPS’s Free Cash Flow to reach approximately $6.2 billion by the end of 2029. Beyond those years, growth is modeled using reasonable assumptions to extend these projections even further. All values are presented in $ (USD).

Based on this DCF analysis, the estimated intrinsic value for UPS stock comes to $135.56 per share. With the current price notably below this valuation, the DCF model suggests the stock is trading at a 29.8% discount to its fair value. This indicates that UPS may be undervalued in today’s market, reflecting potential opportunity if the company delivers on its projected growth trajectory.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests United Parcel Service is undervalued by 29.8%. Track this in your watchlist or portfolio, or discover 927 more undervalued stocks based on cash flows.

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

Approach 2: United Parcel Service Price vs Earnings

For profitable companies like United Parcel Service, using the Price-to-Earnings (PE) ratio is a widely accepted way to gauge valuation. The PE ratio tells investors how much they are paying for a company's earnings, making it especially useful for businesses with a consistent profit history. Growth expectations and perceived risk have a big impact here. Companies with higher growth or lower risk should, in theory, trade at a higher PE than those with more uncertain futures.

UPS currently trades at a PE ratio of 14.68x. That comes in just below the logistics industry average of 16x and well under the average for its public peers at 20.90x. On the surface, this suggests that UPS is priced more conservatively than most comparable companies in its space. However, not all companies are created equal in the eyes of the market. This is where the concept of a “Fair Ratio” comes into play.

The Simply Wall St Fair Ratio is designed to go much deeper than a basic comparison with industry or peers. It accounts for UPS’s specific earning power, expected growth rate, risk factors, profit margins, industry, and even its market capitalization. For UPS, the Fair Ratio is calculated at 19.30x, a proprietary benchmark that provides a more nuanced target.

Since the Fair Ratio (19.30x) is significantly higher than UPS’s current PE (14.68x), the shares appear undervalued by this method as well. This suggests that the market may be pricing in more risk or lower growth expectations than fundamentals justify.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1442 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your United Parcel Service Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is the story you tell about a company through your own perspective on where it is heading, what challenges it faces, and how well it will perform, paired with your financial expectations for its fair value, revenue, earnings, and margins. By building a Narrative, you connect the real-world story of a business with the numbers, resulting in a personalized fair value that helps you decide if the stock looks like a buy or a sell.

Narratives are quick and easy to create on Simply Wall St's Community page, where millions of investors share their viewpoints and assumptions. These Narratives update in real time, adapting to new information like breaking news or fresh earnings reports, so you always have the most relevant view.

Comparing your Narrative’s fair value to the current share price makes the decision to buy, hold, or sell more intuitive. This approach helps you take action with greater clarity and confidence. For example, one Narrative might be cautious and set a fair value as low as $75.00 if UPS's cost pressures persist. Another could see robust automation and global growth driving the stock to a fair value of $132.37, reflecting radically different outlooks.

For United Parcel Service, we will make it easy for you with previews of two leading United Parcel Service Narratives:

• 🐂 United Parcel Service Bull Case

  Fair Value: $132.37

  Current price is 28% below this fair value estimate.

  Expected annual revenue growth: 2.3%

  • Rapid automation, cost-cutting, and healthcare logistics expansion could help UPS achieve higher margins and support stronger long-term growth.
  • International trade agility, new high-growth segments, and digital investments may contribute to increased revenue and profitability.
  • Risks include intensifying competition, global trade volatility, rising labor and sustainability costs, as well as large-scale infrastructure demands.
• 🐻 United Parcel Service Bear Case

  Fair Value: $95.21

  Current price is 0% above this fair value estimate.

  Expected annual revenue growth: 1.8%

  • Recent financial pressures, cost-cutting initiatives, and new debt issuance raise questions about long-term profitability and operational stability.
  • Ongoing labor disputes and shareholder resistance highlight governance issues and potential challenges to management's turnaround plans.
  • Revenue and EPS growth have remained muted, with the price target only slightly above the current share price, indicating limited near-term upside.

Do you think there's more to the story for United Parcel Service? 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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