- If you are wondering whether PPG Industries at around US$123 per share is offering good value right now, you are not alone.
- The stock has had mixed returns, with a 2.6% decline over the last 7 days, an 8.2% gain over 30 days, 18.1% year to date, and 11.7% over 1 year. The 3 year and 5 year returns sit at 4.2% and 4.5% declines respectively.
- Recent news around PPG has focused on its role as a large coatings and materials supplier and how it is positioning its portfolio across construction, automotive and industrial customers. This context helps explain why investors are reassessing the balance between growth potential and risk for the stock.
- On Simply Wall St's valuation checks, PPG Industries currently scores 5 out of 6. We will break this down using different valuation methods before finishing with a broader way to think about what that score really means for you.
Approach 1: PPG Industries Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model estimates what a company might be worth by projecting the cash it could generate in the future and then discounting those cash flows back to today in $ terms.
For PPG Industries, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $1.27b. Analysts have provided forecasts for several years ahead, and beyond that Simply Wall St extrapolates the trend to build a full 10 year path of cash flows.
Those projections run from an estimated $1.34b in free cash flow in 2026 up to around $2.22b by 2035, with each future figure discounted back to today. When all those discounted cash flows are added up, the model arrives at an estimated intrinsic value of about $159.18 per share.
Compared with the current share price of roughly $123, the DCF implies PPG Industries trades at about a 22.6% discount. On this method alone, this result suggests the shares may be undervalued.
Result: UNDERVALUED (on this DCF measure)
Our Discounted Cash Flow (DCF) analysis suggests PPG Industries is undervalued by 22.6%. Track this in your watchlist or portfolio, or discover 46 more high quality undervalued stocks.
Approach 2: PPG Industries Price vs Earnings
For a company that is generating profits, the P/E ratio is a straightforward way to think about what you are paying for each dollar of earnings. It also captures how the market is pricing factors like expected growth and risk, since higher growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk usually point to a lower, more cautious multiple.
PPG Industries currently trades on a P/E of about 17.54x. That sits below the Chemicals industry average of roughly 24.02x and also below the peer group average of around 33.58x. On the surface, that might suggest a more conservative market view compared with many peers.
Simply Wall St’s Fair Ratio for PPG, at about 22.18x, is an estimate of what its P/E might be based on factors such as earnings growth, profit margins, industry, market cap and company specific risks. This is more tailored than a simple comparison with industry or peer averages because it adjusts for PPG’s own characteristics rather than assuming all companies deserve the same multiple. Compared with the current 17.54x, the Fair Ratio points to the shares trading below that modelled level.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your PPG Industries Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple tool on Simply Wall St’s Community page where you connect your story about PPG Industries, your assumptions about its future revenue, earnings and margins, to a forecast and then to a fair value that you can compare directly with today’s share price.
Instead of just taking a single model output, you set your own view on PPG’s growth, profitability and risk, and the platform turns that into a financial forecast and fair value estimate. As new information such as earnings or news arrives, the Narrative updates so you can quickly see whether your thesis still holds up.
For example, one PPG Narrative currently points to a fair value of around US$152.76 per share with higher assumed revenue growth and margins. Another points to about US$125.30 with more modest assumptions. This shows how different but reasonable perspectives can coexist and gives you a clear, structured way to decide whether the current price looks attractive, fully valued or rich based on the story you actually believe.
Do you think there's more to the story for PPG Industries? 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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