- Wondering whether Perrigo's current share price makes sense or if the market has mispriced it? This article walks through the key valuation clues that can help you frame that question.
- The stock has seen a 0.1% move over the last 7 days and a 16.8% return over the past month, set against a much tougher picture with a 21.8% decline year to date and a 52.9% fall over the last year, as well as 65.7% and 68.3% declines over 3 and 5 years respectively.
- Recent attention on Perrigo has focused less on short term trading and more on how the business is valued relative to its fundamentals. This helps explain why sentiment can shift even when long term returns have been weak. That context is important when assessing whether recent price moves reflect changing expectations or simply a reassessment of risk.
- Perrigo currently scores a full 6 out of 6 on our valuation checks. The sections that follow compare what different valuation approaches suggest about the stock's pricing, before finishing with a broader way to think about value that goes beyond any single model.
Find out why Perrigo's -52.9% return over the last year is lagging behind its peers.
Approach 1: Perrigo 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 their present value.
For Perrigo, the model used is a 2 Stage Free Cash Flow to Equity approach built on cash flow projections. The latest twelve month Free Cash Flow is about $143.2 million. Analysts have provided explicit forecasts up to 2030, with projected Free Cash Flow of $501 million in that year. Beyond those analyst estimates, Simply Wall St extrapolates additional cash flows through 2035 based on the earlier projections.
When all of those projected cash flows are discounted back, the DCF suggests an estimated intrinsic value of $52.74 per share. Compared with the current share price, this indicates Perrigo is trading at a 79.4% discount to that estimate, based on this model.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Perrigo is undervalued by 79.4%. Track this in your watchlist or portfolio, or discover 58 more high quality undervalued stocks.
Approach 2: Perrigo Price vs Sales
For companies where earnings are not a steady guide, the P/S ratio can be useful because it focuses on revenue, which is often more stable than profit from year to year. It gives you a quick sense of how much investors are paying for each dollar of sales.
In general, higher growth expectations and lower perceived risk tend to support a higher “normal” or “fair” P/S multiple, while slower growth and higher risk usually line up with a lower figure. Context therefore matters when you compare P/S ratios across companies.
Perrigo currently trades on a P/S of 0.35x. This is well below the Pharmaceuticals industry average P/S of 4.59x and the peer group average of 19.80x. Simply Wall St’s Fair Ratio for Perrigo is 1.88x, which represents the P/S level that would be expected given factors such as its earnings growth profile, industry, profit margins, market cap and key risks. This Fair Ratio goes further than a simple peer or industry comparison because it adjusts for those company specific characteristics instead of assuming that all businesses should trade on similar multiples.
Comparing Perrigo’s actual P/S of 0.35x with the Fair Ratio of 1.88x indicates that the shares are trading below that model-based reference point.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Perrigo Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you attach a clear story about Perrigo to the numbers by linking your view of its future revenue, earnings and margins to a forecast and then to a fair value that you can compare with the current price.
On the Community page, Narratives are set up so you can see different outlooks side by side. For example, one investor might build a more optimistic Perrigo Narrative around a Fair Value of US$40 based on revenue growth, margin expansion and a P/E of 35.2x by 2028. Another investor might prefer a more cautious Perrigo Narrative closer to US$15 that reflects flat revenue, modest margin assumptions and a P/E of 28.2x by 2029.
Because these Narratives update automatically when new earnings, news or valuation inputs are added, you can quickly see whether your Perrigo fair value still makes sense against the latest share price. You can then use that gap, whether above or below the market price, to help decide if the stock looks more like a potential opportunity or something to be more careful with right now.
Do you think there's more to the story for Perrigo? 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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