Is Goodyear Tire & Rubber (GT) Pricing Reflecting Its Recent Share Price Slide?

• Wondering whether Goodyear Tire & Rubber’s current share price actually reflects its underlying value, or if the market is missing something.
• The stock last closed at US$6.63, with returns of 2.8% over 7 days, a 19.6% decline over 30 days, a 25.7% decline year to date, and a 27.3% decline over 1 year, which may prompt you to reassess both risk and potential reward.
• These moves are set against a backdrop of ongoing attention on the auto components sector and how companies like Goodyear Tire & Rubber are positioned within it. Broader market sentiment around cyclical businesses and demand for replacement tires continues to influence how investors view the shares.
• On Simply Wall St’s valuation checks, Goodyear Tire & Rubber records a score of 5 out of 6. The sections ahead will walk through what different valuation approaches say about that score, before finishing with a way to tie all of these methods into a clearer overall view of value.

Find out why Goodyear Tire & Rubber’s -27.3% return over the last year is lagging behind its peers.

Approach 1: Goodyear Tire & Rubber Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes projected future cash flows and discounts them back to today to estimate what the whole business might be worth right now.

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 $182.8 million, so the valuation leans heavily on future projections. Analyst and extrapolated estimates suggest free cash flow reaching $200.4 million in 2028, with a series of projected cash flows between 2026 and 2035 that are all below $1 billion and therefore considered in millions of $.

Bringing all of those projected cash flows back to today, Simply Wall St’s DCF model arrives at an estimated intrinsic value of US$7.64 per share. Compared with the current share price of US$6.63, the model indicates the shares trade at a 13.2% discount, which points to the stock being undervalued on this method alone.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Goodyear Tire & Rubber is undervalued by 13.2%. Track this in your watchlist or portfolio, or discover 58 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Goodyear Tire & Rubber.

Approach 2: Goodyear Tire & Rubber Price vs Sales

For companies where earnings are weak or volatile, the P/S ratio is often more useful than P/E, because it compares the share price to revenue, which tends to be more stable. Investors usually accept a higher or lower P/S ratio depending on what they expect for future growth and how risky the business appears, so there is no single “right” number that suits every stock.

Goodyear Tire & Rubber currently trades on a P/S ratio of 0.10x. This is well below the Auto Components industry average P/S of 0.71x and the peer group average of 7.16x. Simply Wall St’s “Fair Ratio” for Goodyear Tire & Rubber is 0.42x, which is a proprietary estimate of what the P/S might be given factors such as the company’s growth profile, industry, profit margins, market value and specific risks.

Compared with simple peer or industry comparisons, the Fair Ratio aims to be more tailored because it incorporates those fundamentals rather than assuming similar companies should always trade on the same multiple. With the current P/S of 0.10x sitting below the Fair Ratio of 0.42x, this method suggests that the shares may be trading at a discount.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Goodyear Tire & Rubber Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you attach a clear story about Goodyear Tire & Rubber to the numbers by linking your view of its future revenue, earnings and margins to a financial forecast, a Fair Value, and then a simple comparison with today’s share price. This is all within an easy tool on the Community page that updates automatically when new news or earnings arrive. You can see, for example, how one bullish Narrative might point to a Fair Value near the higher analyst target of about US$14.63, while a more cautious Narrative could sit closer to the low end near US$7.30. This gives you a structured way to decide whether the current price around the US$6 to US$7 range looks high or low relative to the story you actually believe.

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.

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