Is There Now an Opportunity in Michelin After Recent Sustainable Mobility Investments?

Ever wondered if Compagnie Générale des Établissements Michelin Société en commandite par actions is a hidden bargain or just treading water in today's market? Let's dig into what the numbers and recent developments reveal about its true value. Despite a 10.0% drop over the past month and a negative 12.7% return year-to-date, Michelin's stock has returned 20.1% over three years and 33.0% over five years, showing a history of resilience mixed with recent volatility. Recently, the company has made headlines with its strategic investments in sustainable mobility and the ongoing rollout of new tire technologies for electric vehicles. These themes keep investors attentive to how Michelin is positioning for industry shifts. These factors have contributed to the recent share price performance and are likely to shape perception of its growth prospects and risk profile going forward. Michelin currently scores 4 out of 6 on our valuation checks, suggesting pockets of value balanced with a few caution flags. We will break down these numbers using established valuation methods and, at the end, share an even smarter way to think about what the stock is truly worth.

Find out why Compagnie Générale des Établissements Michelin Société en commandite par actions's -6.2% return over the last year is lagging behind its peers.

Approach 1: Compagnie Générale des Établissements Michelin Société en commandite par actions Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a widely used valuation approach that estimates a company's intrinsic value by projecting its future cash flows and discounting them back to today's value. This approach helps investors gauge whether a stock is priced attractively relative to its long-term earnings potential.

For Michelin, the latest twelve months of Free Cash Flow (FCF) sits at approximately €1.36 billion. Projections indicate steady growth, with analyst forecasts and extrapolations by Simply Wall St suggesting FCF could reach around €4.03 billion by 2035. Analysts typically provide up to five years of estimates, and values beyond 2029 are modeled using reasonable long-term growth rates to capture the company’s future earning power in a changing industry landscape.

Based on these projections, the DCF valuation model estimates an intrinsic share value of €73.49. With the current trading price representing a 61.8% discount relative to this intrinsic value, Michelin appears significantly undervalued by the market at present.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Compagnie Générale des Établissements Michelin Société en commandite par actions is undervalued by 61.8%. Track this in your watchlist or portfolio, or discover 843 more undervalued stocks based on cash flows.

Story Continues

ML Discounted Cash Flow as at Nov 2025

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Compagnie Générale des Établissements Michelin Société en commandite par actions.

Approach 2: Compagnie Générale des Établissements Michelin Société en commandite par actions Price vs Earnings

The price-to-earnings (PE) ratio is a widely accepted metric for valuing companies that generate consistent profits, as it directly relates a company's market value to its ongoing earnings. For profitable businesses like Michelin, the PE ratio offers a straightforward snapshot of how much investors are willing to pay per euro of profits, reflecting both recent performance and future expectations.

Growth prospects and risk profile play a big part in determining what a “normal” or “fair” PE should be. Rapidly growing, low-risk businesses often justify higher PE ratios, while mature or uncertain companies typically see lower multiples.

Currently, Michelin trades at a PE ratio of 12.6x. This is noticeably below the Auto Components industry average of 21.4x and its closest peers, which average 17.8x. At first glance, this may suggest the stock is trading at a discount relative to both the broader sector and its direct competitors.

However, Simply Wall St introduces the concept of a “Fair Ratio” that blends metrics like earnings growth, profit margins, industry characteristics, market cap, and specific risk factors to set a custom benchmark. In Michelin’s case, the Fair Ratio is 12.1x, just a fraction below its actual PE. Unlike traditional comparisons, this approach gives a truer sense of value by accounting for company-specific dynamics beyond what peers or sector averages might capture.

With Michelin’s PE ratio nearly identical to its Fair Ratio, the stock appears fairly valued on this measure.

Result: ABOUT RIGHTENXTPA:ML PE Ratio as at Nov 2025

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1410 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Compagnie Générale des Établissements Michelin Société en commandite par actions Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives, a dynamic tool designed to help investors connect the story behind a company with what the numbers actually mean for its future.

A Narrative is simply your personalized perspective on how a company's story, such as new innovations, market challenges, or leadership in sustainability, will translate into financial results like future revenues, profit margins, and fair value. Narratives go beyond static multiples or forecasts by linking the “why” behind a company’s prospects with a clear, custom forecast and a calculated fair value, letting your beliefs drive your valuation analysis.

With Simply Wall St’s user-friendly Community Narratives, millions of investors can create and share these stories right on the platform. Narratives allow you to track how your assumptions (or those of leading analysts) stack up as new information comes in, with fair values automatically updating after every earnings report or news headline.

For example, some investors might believe Michelin’s leadership in EV and sustainability will push future earnings toward the upper analyst target of €43.0, while others might focus on margin risks and price competition, favoring the bearish target of €28.0. Narratives let you weigh both and make an informed buy or sell decision as the numbers evolve.

Do you think there's more to the story for Compagnie Générale des Établissements Michelin Société en commandite par actions? Head over to our Community to see what others are saying!ENXTPA:ML Community Fair Values as at Nov 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 ML.PA.

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