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If you are wondering whether Goodyear Tire & Rubber at around US$9.09 is a bargain or a value trap, you are not alone.
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The share price shows mixed recent returns, with about a 0.7% decline over the last 7 days, a 2.5% gain over 30 days, a 1.9% gain year to date, and a 3.1% decline over the past year, while the 3 year and 5 year returns are 21.5% and 18.6% declines respectively.
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Recent interest in Goodyear has partly reflected broader attention on autos and related suppliers, as investors reassess how tire makers fit into changing vehicle trends. At the same time, company specific headlines and sector sentiment have continued to influence how investors think about the balance of risk and potential reward in the stock.
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On our valuation checklist, Goodyear scores 5 out of 6 for being undervalued across several different methods. Next, we will walk through those approaches before finishing with a more comprehensive way to think about what that score really means for you.
Find out why Goodyear Tire & Rubber’s -3.1% return over the last year is lagging behind its peers.
A Discounted Cash Flow model estimates what a company might be worth by projecting its future cash flows and discounting them back to today’s value.
For Goodyear Tire & Rubber, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is a loss of about $437.4 million, so the starting point is negative. Analysts provide free cash flow estimates out to 2027, with Simply Wall St extending those projections further. Within the 10 year projection set, free cash flow for 2027 is $316.05 million and the extrapolated figure for 2035 is $643.29 million, all in $.
Discounting these projected cash flows back to today produces an estimated intrinsic value of about $16.10 per share. Compared with a recent share price around $9.09, the DCF output suggests the stock trades at a 43.6% discount, which indicates that it appears undervalued on this model.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Goodyear Tire & Rubber is undervalued by 43.6%. Track this in your watchlist or portfolio, or discover 868 more undervalued stocks based on cash flows.
For companies where earnings are weak or volatile, the P/S ratio can be a useful way to think about valuation, because it compares what the market is paying for each dollar of revenue rather than profit.
In general, higher growth expectations and lower perceived risk tend to justify a higher “normal” P/S multiple, while slower growth or higher risk usually line up with a lower multiple. That context matters when you compare any company with its sector.
Goodyear Tire & Rubber currently trades on a P/S of 0.14x, compared with the Auto Components industry average of 0.79x and a peer average of 10.77x. Simply Wall St’s Fair Ratio framework estimates what a more tailored P/S might look like by factoring in items such as earnings growth, profit margins, industry, market cap and key risk indicators.
Because it is built from company specific drivers, the Fair Ratio of 0.53x is designed to be more informative than a simple comparison with peers or the industry, which may have very different growth profiles and risk levels.
Set against Goodyear’s actual P/S of 0.14x, the Fair Ratio of 0.53x suggests the shares are trading below that benchmark estimate.
Result: UNDERVALUED
P/S ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1445 companies where insiders are betting big on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation. Narratives let you attach your own story about Goodyear Tire & Rubber to the numbers by combining your assumptions for future revenue, earnings and margins with a forecast and a fair value, all within Simply Wall St’s Community page that is used by millions of investors. This means you can compare that fair value with the current price, see how it changes automatically when fresh news or earnings arrive, and understand why one investor might see Goodyear as closer to US$15 while another anchors around US$9, based on how each of them interprets the same information on competitive pressures, margin potential and long term risks.
Do you think there’s more to the story for Goodyear Tire & Rubber? Head over to our Community to see what others are saying!
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 GT.
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