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Dow (DOW) Could Be 19% Undervalued Following Its $4b Liquidity Update

Simply Wall St · 2d ago

Why Dow’s latest liquidity update matters for investors

Dow (DOW) exited the second quarter with about US$4b in cash and cash equivalents, giving the chemicals producer room to fund higher value projects while still sending a meaningful portion of earnings back to shareholders.

Recent trading has been choppy for Dow, with the share price down 5.67% over the past month and 2.56% over 90 days, even though the year to date share price return is 14.42% and the 1 year total shareholder return is 28.94%. In contrast, 3 and 5 year total shareholder returns show sizeable declines, which points to short term momentum improving off a weak longer term base as investors reassess the company’s cash strength and capital return plans.

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Bulls see Dow’s cash and value score of 6 as a set up for a rerating. Bears point to recent losses and long term return declines. Which side do the numbers lean toward as you weigh the valuation next?

Most Popular Narrative: 19% Undervalued

At a last close of $27.77 versus a narrative fair value of $34.31, Dow is framed as materially undervalued, with that gap tied directly to self help plans rather than short term trading swings.

Dow has increased its 2026 outlook for self help benefits to more than US$1.3b and continues to target over US$3b of largely structural improvements by 2029, which points to a higher earnings base if these cost and growth actions flow through as planned. Dow is reshaping its silicones footprint by closing the higher cost Barry upstream unit in Europe and committing over US$100m to specialty silicones sites in the U.S., China and Japan, which is expected to shift mix toward higher value applications and support margins and EBITDA over time.

See why 90 investors see Dow as 19% undervalued.

The narrative uses a discount rate of 8.87% to bring those planned cash flows and margin changes back to today, then compares that output to the current share price. It leans heavily on Dow’s cost programs, capital allocation choices and portfolio reshaping rather than assuming a big lift from global chemicals demand alone.

Analysts in this narrative also build in the expectation that Dow moves from a loss of $1.3b today to earnings of $2.1b by around 2029, while revenue is modeled at $44.4b and margins at 4.6%. That earnings path, combined with a future P/E assumption of 16.3x that sits below the 22.0x used for the wider US Chemicals group, helps explain why the fair value estimate sits 19.1% above the current market level.

Result: Fair Value of $34.31 (UNDERVALUED)

Still, Dow’s narrative could be knocked off course if elevated feedstock and energy costs keep squeezing margins, or if chlorpyrifos litigation leads to heavier cash outflows.

Find out about the key risks to this Dow narrative.

Next Steps

If this mix of optimism and caution around Dow resonates with you, act promptly, review the full data set, and stress test the story for yourself using the 4 key rewards and 2 important warning signs.

Looking for more investment ideas beyond Dow?

You have seen how Dow stacks up today. Do not stop there when a broader watchlist could surface opportunities that fit your style even better.

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.