- If you are wondering whether Macy's current share price reflects its true worth, the recent trading history gives a useful starting point for that question.
- Over the last week the stock returned 5.8%, with a 30 day return of 8.0%, while year to date performance sits at a 17.1% decline against a 73.5% return over the past year and 35.2% over five years.
- Recent headlines around Macy's have focused on the ongoing debate about the company’s future direction, including scrutiny of its store footprint and plans to reshape its physical and digital presence. These themes help set the backdrop for how investors are interpreting the recent mix of shorter term pullbacks and longer term gains.
- Macy's currently holds a 5 out of 6 valuation score. The rest of this article will look at what different valuation approaches say about that number, before finishing with a way of assessing value that brings these pieces together more clearly.
Approach 1: Macy's Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model takes the cash Macy's is expected to generate in the future and then discounts those projections back into today’s dollars to estimate what the business might be worth right now.
Macy's latest twelve month free cash flow stands at about $578.2 million. Based on the current model, projected free cash flow reaches $664.5 million in 2026 and $775.5 million in 2028, with further estimates extending out to 2035. Analysts provide the nearer term figures, while Simply Wall St extrapolates the later years using its own assumptions to build a full 2 Stage Free Cash Flow to Equity model.
When all those future cash flows are added up and discounted, the DCF model arrives at an estimated intrinsic value of $35.25 per share. Compared with the current share price, this implies the stock is 46.5% undervalued based on these cash flow assumptions.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Macy's is undervalued by 46.5%. Track this in your watchlist or portfolio, or discover 58 more high quality undervalued stocks.
Approach 2: Macy's Price vs Earnings
For a profitable business like Macy's, the P/E ratio is a straightforward way to see how much investors are paying for each dollar of earnings. It links the share price directly to the company’s bottom line, which is usually what drives long term returns.
What counts as a "normal" or "fair" P/E depends on how the market views a company’s growth potential and risk. Higher growth and lower perceived risk often justify a higher multiple, while slower growth or higher risk tend to pull that multiple down.
Macy's currently trades on a P/E of 7.75x. That sits well below the Multiline Retail industry average P/E of 20.49x and a peer group average of 19.25x. Simply Wall St also calculates a proprietary “Fair Ratio” of 12.96x for Macy's, which is the P/E level suggested after considering factors such as earnings growth, profit margins, risk profile, industry and market cap. This Fair Ratio can be more informative than a simple peer or industry comparison because it adjusts for Macy's specific characteristics rather than assuming all retailers deserve the same multiple. With the current P/E of 7.75x sitting under the Fair Ratio of 12.96x, the stock screens as undervalued on this metric.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Macy's Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives bring that idea to life by letting you pair a clear story about Macy's with your own forecasts for revenue, earnings, margins and a fair value, then compare that fair value to the current share price to decide whether the stock looks attractive, fully priced or expensive to you.
On Simply Wall St's Community page, Narratives are available as an easy to use tool that updates automatically when fresh information such as news or earnings is added. This helps your story and valuation stay in sync with what is happening at the company rather than being a static snapshot.
For Macy's, one investor might pick a more upbeat narrative that focuses on the real estate plans, omni channel investments and a higher fair value such as US$24.00. Another might choose a cautious narrative that highlights department store headwinds and a fair value closer to US$6.00. Both can see in one place how those different stories flow through to projected numbers and a price versus fair value view.
For Macy's however we will make it really easy for you with previews of two leading Macy's Narratives:
Fair value: US$24.43 per share
Implied discount to this fair value: 22.8%
Revenue growth assumption: 5.57%
- Macy's owns a sizeable real estate portfolio that can be sold to generate liquidity, reduce debt and fund new investments, with a stated goal of raising about US$600 million to US$750 million from property sales over three years.
- The company reports more than US$7b in annual digital sales, placing it among large US e commerce players and giving it traffic it can try to monetize through a growing media network.
- The bear side of this narrative flags long running store closures, limited progress on improving business health and the risk that the share price could weaken if no takeover offer emerges.
Fair value: US$6.00 per share
Implied downside to this fair value: 214.3%
Revenue growth assumption: 8.91% decline
- This narrative leans on bearish analyst assumptions that revenue declines at 8.91% a year over the next three years and that the market eventually values Macy's at a P/E of 3.2x, well under the current industry level.
- It highlights pressure from e commerce and experiential spending, high fixed costs tied to a large store base and an aging core customer that may limit demand for traditional department store formats.
- It also lays out conditions that could soften this view, including potential benefits from omnichannel investments, real estate monetization, tighter cost control and growth in areas such as private labels, loyalty and media network income.
If you want to see how these stories stack up against your own expectations for Macy's, you can read them in full and compare them side by side with other community views using the narrative tools on Simply Wall St, including Curious how numbers become stories that shape markets? Explore Community Narratives.
Do you think there's more to the story for Macy's? 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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