If you are weighing your next move on Linamar stock, you are in good company. Over the past year, Linamar’s share price has been anything but dull. After an impressive rally that saw shares climb 27.5% year to date and stack up a remarkable 63.5% over five years, it is no surprise investors are eyeing the company’s prospects with renewed interest. Sure, the last month saw a dip of 7.9%, and the past week echoed that caution, slipping 1.7%. The bigger question though is whether these short-term wobbles signal a shift in risk or present a new window for long-term growth.
Some of the stock’s recent moves can be linked to broader market drivers. Renewed interest in industrials and signs of sector rotation may be fueling demand, while macroeconomic uncertainty could be contributing to the short-run volatility. Through all this, what stands out is Linamar’s value proposition. Based on our model, the company scores 3 out of 6 on our valuation checks, indicating it is currently undervalued on half of the core metrics we follow.
The real question is how Linamar looks across different valuation perspectives. In the next section, we will break down the most commonly used valuation methods. Stay tuned as we wrap up with a practical approach for seeing beyond the numbers to truly understand where value lies.
The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future free cash flows and discounting them back to today’s value. For Linamar, analysts used a two-stage free cash flow to equity approach. This means recent analyst cash flow forecasts are extended further into the future using Simply Wall St’s own projections.
Linamar’s current free cash flow stands at CA$707.5 million. Over time, forecasts suggest a modest pace of change in free cash flow, with 2026 expected to see CA$647.5 million and a projected CA$699.0 million in 2035. These figures, all in Canadian dollars, reflect a conservative growth outlook over the next decade.
Based on these projections, the DCF analysis estimates Linamar’s intrinsic value at CA$178.50 per share. This represents a 59.8% discount compared to the current share price and signals the company is significantly undervalued according to this method.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Linamar is undervalued by 59.8%. Track this in your watchlist or portfolio, or discover more undervalued stocks.
The price-to-earnings (PE) ratio is often considered the go-to valuation metric for profitable companies like Linamar because it directly relates a company’s share price to its earnings. Investors favor the PE ratio since it distills complex profitability into a single number, making comparisons across peers and industries more accessible.
A company’s “normal” or “fair” PE ratio is not just about how much profit it makes today. Growth expectations and perceived risks play a big role as well. If the market expects Linamar to grow faster or carry less risk than its competitors, a higher PE can be justified. Conversely, slower growth or higher risks call for a lower ratio.
Currently, Linamar’s PE ratio stands at 20.4x. This is almost perfectly in line with the Auto Components industry average of 20.7x and just a notch lower than the peer group average of 22.7x. While these comparisons offer helpful context, they do not tell the whole story about what Linamar should be valued at.
That is why Simply Wall St uses the “Fair Ratio,” a proprietary benchmark designed to account for more than basic industry comparisons. This metric weighs factors such as Linamar’s earnings growth, profit margins, risk profile, its industry, and its market cap to determine what an appropriate PE should be. This approach is more tailored and dynamic than simply comparing ratio averages because it reflects the unique characteristics of Linamar’s business.
Looking at the difference between Linamar’s actual PE ratio and its Fair Ratio, the numbers are less than 0.10 apart. This suggests the market valuation is very much in line with the company’s fundamentals and outlook.
Result: ABOUT RIGHT
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’s introduce Narratives, a more dynamic and personal approach to making investment decisions. A Narrative is simply your own story or perspective about a company, built on what you think is likely to happen for its future revenue, earnings, and profit margins. By linking your outlook with key forecasts, Narratives connect Linamar’s business story to financial numbers and a calculated fair value, so you can see how your expectations translate into a share price.
Narratives are easy to create and use on Simply Wall St’s Community page, where millions of investors share and compare their views. This feature helps you decide when to buy or sell by matching your fair value against the latest market price, and it refreshes automatically whenever there is important news, results, or big events.
For example, one Linamar Narrative might highlight optimism around flexible equipment investments and new EV programs driving future growth and a CA$72.00 price target. Another could focus on industry challenges and set a fair value as low as CA$55.00, showing just how much perspectives can vary and why your own Narrative matters.
Do you think there’s more to the story for Linamar? 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 LNR.TO.
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