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Air Products And Chemicals (APD) Stock Still Looks Reasonable Following Its 21% Run

Simply Wall St · 1d ago

Air Products and Chemicals has delivered a solid share price run recently, and that leaves investors asking whether the current US$299.59 level is properly supported by the cash the business can generate over time. With a Discounted Cash Flow (DCF) view available, the focus shifts to how those expected cash streams line up against what the market is paying today.

  • The stock is up 21.5% over the past year, which puts real pressure on the question of whether the recent gains are fully backed by its underlying cash flows.
  • The planned LNG based air separation unit in Malaysia, targeted to come online by early 2027, may support future cash generation by expanding production capacity and potentially affecting the timing and scale of investment outlays.
  • Prefer to judge Air Products and Chemicals on sales? See why Air Products and Chemicals's 5.3x P/S tells a different valuation story.

The issue now is whether today's share price for Air Products and Chemicals is justified by the intrinsic value suggested by its cash flows.

If you want to stress test this same cash flow question beyond Air Products and Chemicals, compare it with companies in the 33 high quality undervalued stocks.

Is Air Products and Chemicals Still Cheap on Cash Flow?

The Discounted Cash Flow (DCF) model here is built on cash flow projections rather than earnings. Air Products and Chemicals most recent twelve month free cash flow shows an outflow of about $1.82b, so the valuation leans heavily on an assumption that this reverses and moves into sustained positive territory over the coming years.

Analysts and internal estimates in the model point to recovering and then growing free cash flow in the next decade. This supports an estimated intrinsic value that the DCF suggests is meaningfully above the current $299.59 share price. Because the planned LNG based air separation unit in Malaysia is included as part of that cash generation story rather than a separate one off, the gap between the cash flow based valuation and today’s price reflects both the upfront investment burden and the later benefit in one place. Find out what Air Products and Chemicals could be worth using our Discounted Cash Flow (DCF) estimate.

The Air Products and Chemicals Narrative: What Would Justify Today's Price?

Simply Wall St Narratives pick up where the cash flow puzzle for Air Products and Chemicals leaves off by spelling out which assumptions on growth, margins and earnings would need to hold for the shares to be worth materially more or less than today’s price, and they sit on the stock’s Community page. Rather than relying on a single multiple or model output, each narrative lays out its own fair value assumptions so you can track those against actual results as they come through.

One of the top community narratives on Air Products and Chemicals: 13% undervalued

"The main factor that has to go right is continued capital discipline, including disciplined capex in the US$2.0b to US$2.5b range..."

Discover why this Narrative puts Air Products and Chemicals at 13% undervalued.

Before acting on Air Products and Chemicals' valuation, there is one more factor to weigh

Cash flows and project plans tell only part of the Air Products and Chemicals story. The people making capital decisions and how they are rewarded can heavily influence future outcomes. See who runs Air Products and Chemicals and how they are paid.

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.