Are you wondering if now is the right time to get involved with Aptiv stock? You are not alone. Plenty of investors are keeping a close eye on this auto-tech player, especially after what has unfolded over the last few months. Aptiv’s stock just posted a solid 9.0% jump in the past 30 days, and its year-to-date gain has been a hefty 41.7%. It is hard to ignore that momentum, even if the three-year return sits at a modest 3.0% and the five-year return shows a 7.0% dip. Clearly, Aptiv has managed to recapture investor attention this year after a tough run since 2019.
What is fueling the change in mood? Recent innovations across the electric vehicle supply chain and a fresh wave of optimism about auto technology have contributed to improved sentiment for the sector overall. For Aptiv in particular, that means growth potential is suddenly back in focus. However, as savvy investors know, price momentum tells only part of the story. The bigger question right now is whether Aptiv is genuinely undervalued, or just riding a market wave.
That is where the valuation analysis gets interesting. Aptiv scores a 4 out of 6 on our valuation checklist, which suggests the stock checks most of the boxes for being undervalued. But how should you interpret that score? Up next, we are breaking down the main valuation methods. Later on, we will look at an even sharper way to think about what Aptiv might really be worth.
Why Aptiv is lagging behind its peers
The Discounted Cash Flow (DCF) model estimates a company’s true value by projecting its future free cash flows and discounting them back to today’s dollars. This approach helps investors see beyond current market sentiment and focus on long-term fundamentals.
For Aptiv, the current Free Cash Flow stands at $1.5 billion. Analysts project this figure will steadily grow, reaching roughly $2.0 billion by 2028. Simply Wall St further extrapolates the company’s cash flows out to 2035, with projections passing $3 billion by then, though those longer-range figures naturally carry greater uncertainty. All these forecasts are expressed in US dollars.
According to the DCF model, Aptiv’s estimated intrinsic value is $186.61 per share. This figure is currently 54.2% higher than the company’s prevailing market price, suggesting a substantial discount. In other words, the stock appears deeply undervalued by this model.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Aptiv is undervalued by 54.2%. Track this in your watchlist or portfolio, or discover more undervalued stocks.
The Price-to-Earnings (PE) ratio is the go-to valuation metric for profitable companies because it directly compares a company’s share price to its per-share earnings. This helps investors gauge how much they are paying for each dollar of profit. It serves as a quick way to spot value among established businesses like Aptiv.
What counts as a “normal” or “fair” PE ratio depends on several factors. Fast-growing companies typically command higher PE ratios, since investors expect bigger future profits. Higher risks or stagnant growth, on the other hand, tend to justify a lower multiple.
Aptiv’s current PE ratio is 18.4x. For context, the average PE ratio among Auto Components industry peers sits at 18.4x, while its sector peer average is notably higher at 28.3x. These numbers suggest Aptiv is relatively aligned with its direct industry, but appears inexpensive compared to faster-growing peers.
This is where Simply Wall St’s proprietary “Fair Ratio” is relevant. Unlike a straightforward peer or industry comparison, the Fair Ratio factors in Aptiv’s earnings growth outlook, margins, risk, industry, and market cap for a more tailored benchmark. Aptiv’s Fair PE Ratio is estimated at 20.8x, which is a bit above its current level. This indicates that, after adjusting for growth and risk factors, Aptiv appears slightly undervalued based on earnings.
Result: UNDERVALUED
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is simply your personal story or thesis about a company, not just what the numbers say, but the reasons behind those numbers. It is a tool that lets investors sum up their unique expectations for a company’s fair value by connecting their view of its industry, future revenue, margins, risks, and catalysts into a single, clear perspective.
On Simply Wall St’s Community page, millions of investors use Narratives to clearly spell out their reasoning and see how their investment story stacks up against others. With Narratives, you can easily compare your fair value assumptions to the current market price and spot when a stock is over- or under-valued, helping you decide when to buy or sell. Even better, Narratives are updated dynamically as new information such as earnings or news comes in, so your view is always informed by the latest outlook.
For example, some investors may believe Aptiv’s innovations in advanced electrical systems and ADAS will drive substantial growth, assigning a fair value up to $97 per share. Others, who are worried about operational risks or market slowdowns, see a more cautious outlook and value the company as low as $60 per share.
Do you think there’s more to the story for Aptiv? Create your own Narrative to let the Community know!
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.
Companies discussed in this article include APTV.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com