Is Now the Right Moment to Reconsider Nestlé After Recent Share Price Gains?

If you are looking at Nestlé and wondering whether now is the right time to buy, sell, or simply watch from the sidelines, you are not alone. The past few years have been a rollercoaster for one of the world’s most recognized consumer brands, with the stock price reflecting those ups and downs. In the past week alone, Nestlé shares have climbed 1.9%, and over the last month, they are up 2.8%. That momentum is a welcome sight for investors after a much tougher stretch. The stock is still down 6.8% over the past year and off by more than 19% from five years ago.

While some of that movement may be tied to shifting global market trends and changing risk perceptions, there is also an ongoing conversation around how fairly valued or undervalued Nestlé really is right now. Based on six key checks commonly used to assess value, Nestlé scores a 4 out of 6. This suggests it may indeed be undervalued on several important metrics.

But what do those scores actually mean for your portfolio decisions, and which valuation approaches matter most for a company like this? Let's break down the methods analysts rely on to judge value, before diving into an even more insightful way to look at Nestlé’s shares later in the article.

Why Nestlé is lagging behind its peers

Approach 1: Nestlé Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) approach estimates a company’s intrinsic value by forecasting its future cash flows and then discounting them back to today’s value. In Nestlé’s case, analysts use a two-stage Free Cash Flow to Equity model to make these projections.

According to the current data, Nestlé generated CHF 8.8 billion in Free Cash Flow (FCF) over the last twelve months. Projections suggest that by 2029, this annual FCF could reach CHF 11.9 billion, based on consensus analyst estimates and further extrapolations. Over the next decade, the model incorporates a gradual growth path in FCF, from CHF 9.8 billion in 2026 up to roughly CHF 13.3 billion by 2035. All figures are in Swiss Francs (CHF).

After discounting those future cash flows to their present value, the model calculates an intrinsic value for Nestlé shares of CHF 144.03. At current market prices, this implies the stock is trading at a 47.5% discount to its estimated intrinsic value. In other words, by this method, Nestlé appears substantially undervalued.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Nestlé is undervalued by 47.5%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Story Continues

Approach 2: Nestlé Price vs Earnings (PE) Analysis

For profitable companies like Nestlé, the Price-to-Earnings (PE) ratio is often considered the gold standard of valuation metrics. The PE ratio shows how much investors are willing to pay for each unit of earnings, making it especially useful when a company has stable and predictable profits.

What counts as a “fair” PE ratio depends on more than just recent performance. Companies with higher expected growth, lower risk, and strong market positions generally deserve higher PE multiples. On the other hand, slower growth or greater risks typically warrant lower PE ratios.

Currently, Nestlé’s PE ratio sits at 18.88x. This is higher than the average for the Food industry, which stands at 16.19x, but well below the average PE for its peer group, which is 29.94x. Comparing multiples across broad groups can be misleading though, because these benchmarks do not always account for company-specific strengths and risks.

This is where Simply Wall St’s proprietary “Fair Ratio” comes in. The Fair Ratio is calculated as 28.30x for Nestlé and reflects not just industry averages, but also considers Nestlé’s projected earnings growth, profit margins, market cap, and unique risk profile. It is a much richer benchmark than simply comparing to peers or the sector as a whole.

Looking at these numbers, Nestlé’s current PE ratio of 18.88x is notably lower than its Fair Ratio of 28.30x, suggesting the stock is trading at a significant discount relative to where it would be valued given its fundamentals.

Result: UNDERVALUEDSWX:NESN 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 Nestlé Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your personal investment story: it is the story you believe for a company, combining your own view of its future with numbers like fair value and forecasts for revenue, earnings, and margins.

Instead of just comparing typical valuation metrics, Narratives bring together a company’s business story, your financial expectations, and an estimated fair value. This approach makes clearer links between what you believe might happen next and whether that makes the stock a buy, sell, or hold at today's price.

On Simply Wall St, Narratives are built with a few clicks and can be found easily within a company’s Community page, where millions of investors share and refine their perspectives every day.

The benefit of Narratives is that you can see exactly how your assumptions about Nestlé’s future translate to a fair value, and then compare that to the current price. Whenever news breaks or earnings come out, your Narrative updates automatically so your conclusions always reflect the latest facts.

For example, some investors have built bullish Narratives for Nestlé that see rapid growth in China and new digital strategies resulting in fair values as high as CHF103.0. The most cautious investors see ongoing challenges and come up with targets as low as CHF71.0, demonstrating how different perspectives can lead to very different decisions, all grounded in a transparent and dynamic framework.

Do you think there's more to the story for Nestlé? Create your own Narrative to let the Community know!SWX:NESN 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 NESN.swx.

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