Wondering if now is the right moment to make a move with Continental stock? You are not alone. Continental has been catching investors’ attention with a recent surge, jumping 13.1% over the last month and posting an impressive 49.9% gain for the past year. That is more than just a hot streak, as it hints at shifting perceptions about the company’s potential and the risks involved.
Two key developments have been fueling the latest optimism. Continental announced a new partnership in the electric mobility sector, a segment investors believe could accelerate long-term growth. At the same time, industry-wide supply chain improvements have calmed concerns that kept shares subdued a year ago. As a result, the stock’s risk premium appears to be narrowing, even as analysts debate whether the current price fully reflects the company’s renewed momentum.
Of course, rapid price gains can bring valuation questions to the forefront. According to our multi-factor analysis, Continental is undervalued in 4 out of 6 key checks, earning it a value score of 4. That is a strong signal worth closer examination, but it also raises the question: what do those scores reveal, and are traditional valuation yardsticks truly enough in today’s market environment?
Let’s take a closer look at how Continental stacks up using several common valuation approaches. And stick around, because there is an even smarter, more nuanced way to cut through the noise that we will unpack at the end.
The Discounted Cash Flow (DCF) model is a cornerstone of stock valuation, designed to estimate the intrinsic value of a company by forecasting its future cash flows and then discounting those projections to reflect their value in today’s terms. This approach focuses on financial fundamentals rather than market sentiment.
For Continental, recent financials show a robust last twelve months Free Cash Flow (FCF) of €1.24 billion. Analysts project this figure to reach approximately €1.52 billion by the end of 2027, with further long-term projections indicating slightly fluctuating but consistently high FCF levels through 2035. These extended forecasts, made by Simply Wall St when analysts’ estimates run out, help paint a picture of sustained financial strength.
Using these projections, the DCF method arrives at an estimated fair value of €114.47 per share for Continental. This intrinsic value suggests that the stock is trading at a sizeable 43.7% discount compared to its current market price, which points to significant undervaluation based on present cash flow fundamentals.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Continental is undervalued by 43.7%. Track this in your watchlist or portfolio, or discover more undervalued stocks.
The Price-to-Earnings (PE) ratio is widely used to value profitable companies like Continental because it links a company’s current share price to its earnings, giving investors a direct way to compare profits to what the market is willing to pay. It works especially well for businesses with consistent profitability, making it an essential gauge for assessing stocks in the auto components sector.
However, a “normal” or fair PE ratio is not one-size-fits-all. Factors such as expected future earnings growth, business risk, and industry dynamics all play an important role in shaping what is reasonable. Fast-growing or lower-risk firms typically command a higher PE, while businesses facing headwinds may warrant a lower figure.
Currently, Continental trades at a PE ratio of 11.73x. This is considerably lower than the Auto Components industry average of 21.32x and the peer group’s average of 69.83x. To provide more context, Simply Wall St calculates a “Fair Ratio” of 11.18x for Continental, derived from a blend of factors like the company’s growth outlook, earnings stability, profitability, industry characteristics, and size. This Fair Ratio goes beyond simple peer or sector comparisons and tailors the benchmark to Continental’s unique fundamentals and risk profile.
With Continental’s current PE just slightly above its Fair Ratio, and a difference of less than 0.10x, the shares appear to be priced about right based on earnings multiples and underlying business dynamics.
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 you to Narratives. A Narrative connects your perspective on a company, including what you expect for its future revenue, margins, and risks, with a financial forecast. This then leads directly to a fair value. Narratives make it easy to see the story behind the numbers by letting you set your assumptions and visualize what those mean for the company’s potential, rather than relying solely on static valuation models.
On Simply Wall St’s Community page (used by millions of investors), Narratives are a powerful and approachable tool for shaping your own buy or sell decision. They allow you to compare your Fair Value with the current Price and see where your expectations differ from others, making it clear when the market might be overly cautious or optimistic. Best of all, Narratives update dynamically whenever new information, such as quarterly earnings or major news, emerges so your investment thesis stays current and relevant.
For example, with Continental, some Narratives forecast a fair value as high as €100 for strong growth in autonomous driving and smart systems, while others put it as low as €66 if cost pressures or legal risks impede profitability. Narratives let you choose the scenario and numbers that make the most sense to you, making investing both smarter and more personal.
Do you think there’s more to the story for Continental? 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 CON.DE.
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