Is It Too Late To Consider FLSmidth (CPSE:FLS) After Strong Multi‑Year Share Gains?

• If you are wondering whether FLSmidth at a last close of kr.474.4 still offers value, you are not alone. The recent share performance has put its pricing firmly in the spotlight.
• The stock has posted returns of 6.6% over the last 7 days, 14.1% over the last 30 days, 5.4% year to date, 38.8% over 1 year, 83.1% over 3 years and 121.9% over 5 years, which naturally raises questions about what is already reflected in the price.
• Recent company updates and industry headlines have kept attention on FLSmidth, giving investors more information to weigh against these share price moves. This article steps back from the day to day news flow to focus on how the current price lines up with a range of valuation checks.
• On our checklist, FLSmidth scores a 4 out of 6 valuation score, which means we will look at where it appears supported by fundamentals, where it looks less clear, and how traditional valuation methods compare with a more comprehensive way of thinking about value that we will come to at the end.

FLSmidth delivered 38.8% returns over the last year. See how this stacks up to the rest of the Machinery industry.

Approach 1: FLSmidth Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company could be worth by projecting its future cash flows and then discounting those back to today to reflect risk and the time value of money.

For FLSmidth, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flows reported in DKK. The latest twelve month free cash flow is DKK 1,045.9 million. Analyst estimates are used for the next few years, then Simply Wall St extrapolates further, with projected free cash flow for 2029 of DKK 1,676.0 million. Ten year projections gradually extend this profile through to 2035 using modest growth assumptions.

When all those projected cash flows are discounted back and added together, the model arrives at an estimated intrinsic value of around DKK 619 per share. Compared with the recent share price of DKK 474.4, this implies the stock is about 23.4% undervalued on this DCF view.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests FLSmidth is undervalued by 23.4%. Track this in your watchlist or portfolio, or discover 877 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 FLSmidth.

Approach 2: FLSmidth Price vs Earnings

For profitable companies, the P/E ratio is a useful shorthand because it links what you pay directly to the earnings the business is generating today. Investors usually accept a higher P/E when they expect stronger growth or see lower risk in those earnings, and a lower P/E when growth expectations or perceived risks are higher.

FLSmidth currently trades on a P/E of 19x. That sits slightly below the Machinery industry average of about 24.1x and close to the peer group average of 19.3x. Simply Wall St also calculates a proprietary “Fair Ratio” for FLSmidth of 17.8x, which is the P/E level it suggests could be reasonable given factors such as the company’s earnings growth profile, industry, profit margins, market cap and risk characteristics.

This Fair Ratio can be more tailored than a simple peer or industry comparison because it aims to adjust for differences in growth, risks and profitability rather than assuming all Machinery companies deserve the same multiple. Compared with the current P/E of 19x, the Fair Ratio of 17.8x indicates that FLSmidth is trading at a modest premium on this metric.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your FLSmidth Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simply your story about FLSmidth tied to a set of numbers such as your fair value estimate, your view on future revenue, earnings and margins, and a clear link from that story to a financial forecast and then to a fair value that you can easily track on Simply Wall St’s Community page. You can compare it with other investors’ views and use it to decide whether FLSmidth looks attractive by lining up your Fair Value against the current price. The Narrative updates automatically when new news or earnings arrive. For example, one investor might look at the higher analyst price target of DKK 500 and build a Narrative around stronger margins and a higher future P/E, while another might anchor on the lower DKK 344 target with more cautious assumptions. Both can then see in real time how fresh information nudges their fair value closer to or further from the live market price.

Do you think there's more to the story for FLSmidth? 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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