Is Valvoline (VVV) Pricing Make Sense After Recent Share Price Rebound

• If you are wondering whether Valvoline at around US$32.22 is a fair deal or not, this article will walk through how its current price lines up against different ways of thinking about value.
• The stock has returned 11.6% over the past week and 4.0% over the last month, while the 1 year return is a 7.3% decline and the 5 year return is 40.0%. This gives you a mixed picture of recent momentum versus longer term results.
• Recent share price moves have come as investors continue to reassess the business following its focus on retail services and its position in the broader auto care market. These context shifts matter because they can influence how much investors are willing to pay for each dollar of Valvoline's business.
• On our simple 6 point valuation checklist, Valvoline scores 2 out of 6 for being undervalued. Next we will compare what different valuation methods suggest about the stock's pricing before finishing with a way to make sense of those numbers in a more complete way.

Valvoline scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Valvoline Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes estimates of the cash Valvoline may generate in the future and discounts those cash flows back to what they could be worth today. It is essentially asking what a rational buyer might pay now for those projected cash streams.

For Valvoline, the latest twelve month Free Cash Flow is about $59.2 million. Using a 2 Stage Free Cash Flow to Equity model, analysts provide explicit forecasts for the next few years, then Simply Wall St extrapolates further out. Under this framework, projected Free Cash Flow for 2035 is around $330.2 million, with interim estimates such as $78.6 million in 2026 and $129.2 million in 2027. All figures are in US$.

When these cash flows are discounted back and combined with a terminal value, the model arrives at an estimated intrinsic value of about $27.25 per share. Compared with the current share price of roughly $32.22, the DCF suggests Valvoline is about 18.2% overvalued on this set of assumptions.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Valvoline may be overvalued by 18.2%. Discover 879 undervalued stocks or create your own screener to find better value opportunities.

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

Approach 2: Valvoline Price vs Earnings

For a profitable company like Valvoline, the P/E ratio is a useful way to think about value because it links what you pay for each share to the earnings that the business is currently generating. In simple terms, a higher P/E usually reflects higher growth expectations or a lower perceived risk, while a lower P/E often signals more modest growth expectations or higher perceived risk.

Valvoline currently trades on a P/E of about 19.09x. That sits below the Specialty Retail industry average of roughly 20.88x, but above the peer group average of around 13.32x. To move beyond simple comparisons, Simply Wall St applies its own “Fair Ratio” framework, which estimates what P/E might make sense for Valvoline given factors such as its earnings growth profile, industry, profit margins, market cap and company specific risks.

This Fair Ratio for Valvoline is 15.87x. It is designed to be more tailored than a broad peer or industry average because it incorporates those business specific drivers rather than just grouping it with other retailers. Compared with the current P/E of 19.09x, the Fair Ratio is lower, suggesting the shares are pricing in more optimism than this model would imply.

Result: OVERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1444 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Valvoline Narrative

Earlier we mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St allow you to turn your view of Valvoline into a clear story that links what you think is happening with the business to a financial forecast and then to a fair value. This makes it easier to compare that fair value to the current price, see in real time how new information such as earnings or news changes the numbers, and understand why one investor might build a Narrative around the higher US$50 analyst target while another leans toward the lower US$38 target. All of this is available within a simple tool on the Community page that is used by millions of investors.

Do you think there's more to the story for Valvoline? 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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