How Do Shell’s Shares Stack Up After U.S. Clearance on Trinidad Offshore Project?

Thinking about what to do with your Shell shares as the stock hovers near $27? You are definitely not alone. Shell has a way of drawing attention, whether you have held it through breakneck gains or watched from the sidelines as it has powered through a tough energy market. The stock has held up pretty well, climbing 2.3% over the past month and 6.7% since the start of the year, despite a slight dip of 1.5% in the last week. If you zoom out, the broader picture is even more eye-catching, with Shell up 8.6% over the past year and a staggering 238.7% over five years. That kind of run, even with some recent zigzags, makes it hard to ignore as a potential investment.

These moves have not happened in a vacuum. While OPEC is keeping oil demand forecasts steady, Shell is making strategic moves by restarting the sale of its Indian renewables arm and gaining fresh U.S. approval to work on major offshore projects. It is clear the market sees evolving risks and opportunities at play, and that is rippling into Shell's stock price. But how does Shell stack up from a valuation perspective right now? By traditional measures, Shell checks the “undervalued” box for 3 out of 6 core criteria, giving it a value score of 3. That gives us a starting point, but just ticking boxes is not the full story.

Let us take a closer look at each valuation approach to see what is really driving the numbers. Stick around for a perspective that can give you an even sharper edge in sizing up Shell’s true worth.

Why Shell is lagging behind its peers

Approach 1: Shell Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates the true value of a business by forecasting its future cash flows and discounting them back to today's dollars. In Shell's case, this analysis applies a two-stage Free Cash Flow to Equity model, which means it uses projected cash flows for several years ahead and then accounts for a long-term estimate.

Shell's latest reported Free Cash Flow (FCF) stands at $30.57 billion, reflecting the current generation of surplus cash after operational costs and investments. Analysts project a gradual increase and then stabilization in these annual cash flows, expecting FCF to reach $24.08 billion by 2029. For the next decade, further forecasts are modeled by extrapolation, rather than based on explicit analyst consensus.

After crunching these numbers, the DCF model arrives at an estimated intrinsic value of $46.45 per share for Shell. Compared to the current share price near $27, this suggests that Shell is trading at a 41.9% discount to its fair value based on cash flow fundamentals.

Story Continues

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Shell.SHEL Discounted Cash Flow as at Oct 2025

Our Discounted Cash Flow (DCF) analysis suggests Shell is undervalued by 41.9%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Shell Price vs Earnings (P/E)

For profitable companies like Shell, the Price-to-Earnings (P/E) ratio is a practical and widely used metric to gauge what the market is willing to pay for each dollar of earnings. This approach works well because it allows investors to compare a stock’s valuation relative to its profitability, which is a core driver of long-term returns.

A "normal" or "fair" P/E ratio can change depending on how fast a company is expected to grow and how much risk it faces. Faster growth and lower risk generally command a higher P/E, while the opposite holds true for slower, riskier companies.

Shell currently trades at a P/E ratio of 15.3x. This sits just above the industry average P/E of 12.9x and slightly ahead of its peer group average of 14.9x. At first glance, this might suggest Shell is valued at a slight premium compared to its immediate competitors.

However, Simply Wall St's Fair Ratio for Shell comes in at 21.3x. The Fair Ratio is a more nuanced benchmark that goes beyond just comparing Shell to its industry or peers, as it adjusts for the company’s earnings growth, profit margins, market capitalization, and unique risk profile.

By stacking the Fair Ratio (21.3x) against Shell's current P/E (15.3x), it suggests the shares may actually be undervalued. The market is not fully pricing in Shell's earnings potential and risk-adjusted growth story.

Result: UNDERVALUEDLSE:SHEL PE Ratio as at Oct 2025

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Shell Narrative

Earlier, we mentioned an even better way to understand valuation, so let us introduce you to Narratives, which are powerful stories behind the numbers that help you invest with real insight. A Narrative is your personal perspective about a company, linking what you believe about Shell’s future to specific financial forecasts like expected revenues, profits, and margins. These factors together suggest a fair value for the stock.

Narratives go beyond static analysis by allowing you to connect Shell’s business moves, risks, and opportunities to your forecast and investment decisions. On Simply Wall St’s Community page, you can easily explore, build, and update Narratives just by adjusting assumptions, with millions of investors participating around the world.

With Narratives, deciding when to buy or sell Shell becomes clearer because you compare your fair value, which is driven by your outlook and the latest information, to the current share price. Since Narratives update automatically with fresh news or results, they always reflect the most recent reality.

For example, one investor might see Shell as worth £39.36 per share by 2028 thanks to LNG expansion and margin growth. Another, more cautious investor might set fair value closer to £27.06 because of energy transition risks and sector headwinds. Both views are visible, can be compared, and are continuously updated within the platform.

Do you think there's more to the story for Shell? Create your own Narrative to let the Community know!LSE:SHEL Community Fair Values as at Oct 2025

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 SHEL.L.

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