- If you are looking at Garrett Motion and wondering whether the current share price still offers value, you are not alone. This article focuses squarely on what the numbers suggest about that question.
- The stock last closed at US$18.90, with returns of 6.1% over 30 days, 8.7% year to date, 94.2% over 1 year, 150.8% over 3 years and 191.3% over 5 years. Those figures naturally put more attention on what you might be paying today.
- Recent coverage has focused on Garrett Motion's role in the automobiles space and how investors are reassessing businesses linked to vehicle and powertrain technology. This backdrop helps explain why a stock with a long run of strong returns can still attract fresh interest and questions about whether expectations are getting ahead of themselves.
- Simply Wall St currently assigns Garrett Motion a valuation score of 5/6. This reflects how often the company screens as undervalued across six separate checks. The next sections will walk through those traditional valuation approaches and will also point you to a more complete way of thinking about value at the end of the article.
Approach 1: Garrett Motion Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model estimates what a business could be worth today by projecting future cash flows and discounting them back to a single present value figure.
For Garrett Motion, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $332.4 million. Analyst estimates and extrapolations point to projected free cash flow of $883.9 million in 2035, with intermediate years such as 2026 and 2028 sitting at $398.8 million and $544 million respectively. Simply Wall St uses analyst inputs for the nearer years and then extends those cash flows further out using its own assumptions.
After discounting this stream of projected cash flows to today, the model arrives at an estimated intrinsic value of about $59.87 per share. Compared with the recent share price of US$18.90, this suggests the stock is trading at a 68.4% discount to this DCF-based estimate of value.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Garrett Motion is undervalued by 68.4%. Track this in your watchlist or portfolio, or discover 54 more high quality undervalued stocks.
Approach 2: Garrett Motion Price vs Earnings
For a profitable business like Garrett Motion, the P/E ratio is a straightforward way to think about what you are paying for each dollar of earnings. Investors usually accept a higher P/E when they expect stronger growth or see lower risk, and a lower P/E when growth expectations are more modest or the risk profile is higher.
Garrett Motion currently trades on a P/E of 11.6x. That sits below the Auto Components industry average of 21.0x and well below the peer average of 32.0x. On the surface, that gap suggests the market is applying a lower earnings multiple to Garrett Motion than it does to many listed peers in the same space.
Simply Wall St also calculates a proprietary “Fair Ratio” of 16.1x for Garrett Motion. This is designed to be more tailored than simple peer or industry comparisons, because it considers factors such as earnings growth, profit margins, the company’s industry, market cap and key risks. Comparing the current P/E of 11.6x with this Fair Ratio of 16.1x suggests the shares are pricing in a lower multiple than that model implies.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Garrett Motion Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. Narratives let you attach a clear story about Garrett Motion’s future revenue, earnings and margins to a financial forecast and a fair value. You can then compare that fair value with today’s share price to decide whether the stock looks attractive to you right now.
On Simply Wall St’s Community page, millions of investors use Narratives as an accessible tool to set their own assumptions and see how new information such as the Ferrari partnership, HVAC compressor launches or share buybacks updates those forecasts automatically. They can then weigh different viewpoints. For example, one Garrett Motion Narrative sees opportunity in hybrid, electric and industrial expansion and arrives at a fair value of US$21.20. Another focuses on risks around internal combustion exposure and margins and lands closer to the US$15.00 analyst target.
Do you think there's more to the story for Garrett Motion? 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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