Is It Time To Reassess Macy's (M) After Its Strong Five Year Share Price Run

• If you are wondering whether Macy's current share price still offers value, this article will walk through what the numbers are saying and how that might fit with your own view of the business.
• Macy's shares last closed at US$22.77, with returns of 4.8% over the past 7 days, 4.7% over 30 days, 0.1% year to date, 55.7% over 1 year, 24.4% over 3 years, and 77.0% over 5 years.
• Recent headlines around Macy's have focused on the company as a department store brand in a changing retail market and on how investors are reacting to its current footprint and store formats. At the same time, the share price performance you see above has kept the stock on the radar of investors who are watching for shifts in how the market is pricing established retailers.
• On Simply Wall St's valuation checks, Macy's scores a 5 out of 6 for being potentially undervalued, and next we will look at how different valuation methods arrive at that view and why an even richer way to think about valuation comes at the end of the article.

Macy's delivered 55.7% returns over the last year. See how this stacks up to the rest of the Multiline Retail industry.

Approach 1: Macy's Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company might be worth by taking projected future cash flows and discounting them back to today, so you can compare that value with the current share price.

For Macy's, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flow projections. The latest twelve month free cash flow is about $678.0 million. Analysts provide explicit estimates for the next few years, and Simply Wall St then extrapolates further out, with projected free cash flow of $748.3 million in 2035 according to the ten year schedule.

When those future cash flows are discounted back to today in this model, the estimated intrinsic value comes out at roughly $29.77 per share. Against the recent share price of $22.77, this implies an intrinsic discount of about 23.5%, which indicates that Macy's is trading below this model’s estimate of fair value.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Macy's is undervalued by 23.5%. Track this in your watchlist or portfolio, or discover 53 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 Macy's.

Approach 2: Macy's Price vs Earnings

For a profitable company like Macy's, the P/E ratio is a useful shorthand because it links what you pay per share to the earnings the business is currently generating. Investors usually accept a higher P/E when they expect stronger growth or see lower risk, and a lower P/E when growth expectations are more modest or risks feel higher.

Macy's currently trades on a P/E of 12.69x. That sits below both the Multiline Retail industry average P/E of 19.21x and the broader peer average of 20.14x. Simply Wall St also calculates a proprietary Fair Ratio of 15.75x for Macy's, which is the P/E level that would be consistent with its earnings growth profile, profitability, industry, market cap and risk characteristics.

This Fair Ratio aims to be more tailored than a simple comparison with industry or peer averages because it tries to adjust for what makes Macy's different, including its margins and risk factors. Comparing the Fair Ratio of 15.75x with the current P/E of 12.69x suggests the shares are trading below this model's assessment of a more typical valuation.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 22 top founder-led companies.

Upgrade Your Decision Making: Choose your Macy's Narrative

Earlier we mentioned that there is an even better way to think about valuation, and on Simply Wall St that starts with Narratives. You set out your story for a company like Macy's, connect that story to specific assumptions for future revenue, earnings and margins, and the platform turns those inputs into a Fair Value you can compare with the current share price so you can decide whether you think it is priced attractively or not.

A Narrative is essentially your view of how the business plays out, written in plain language and backed by numbers. On the Community page you can see different versions already in use by millions of investors, from one Narrative that arrives at a Fair Value of about US$6.0 per share for Macy's to another that reaches US$27.00. These reflect very different expectations about how its real estate, omnichannel efforts, store footprint and margins might shape the future.

Because these Narratives are tied into real time data, when new earnings, guidance or news are added, the forecasts and Fair Values update automatically. This allows you to quickly see whether the story you believe in still lines up with the current price or if you want to adjust your assumptions before making any decision.

For Macy's, however, we'll make it really easy for you with previews of two leading Macy's Narratives:

🐂 Macy's Bull Case

Fair Value: US$24.43 per share

Implied discount to this Narrative: about 6.8% compared to the recent US$22.77 share price

Assumed revenue growth: 5.57% a year

• Views Macy's real estate portfolio as a source of liquidity that could help pay down debt, fund investments, and support the business, with a plan to raise about US$600 million to US$750 million from property sales over three years.
• Highlights more than US$7b in annual digital sales and sees the media network as a way to monetize online traffic further.
• Recognizes risks around past turnaround efforts and the possibility that sentiment could weaken if takeover interest fades or if sales and margins do not improve.

🐻 Macy's Bear Case

Fair Value: US$21.90 per share

Implied premium to this Narrative: about 4.0% compared to the recent US$22.77 share price

Assumed revenue trend: 4.97% annual decline

• Builds on analyst assumptions that revenue could decline while profit margins edge higher, with earnings rising to a projected US$663.0 million and a lower future P/E multiple than the wider Multiline Retail industry.
• Emphasizes execution risks around omni channel upgrades, store remodels, private brands, and digital progress, particularly if cost savings and efficiency gains do not come through as expected.
• Flags pressure from e-commerce competitors, tariffs, and reliance on discretionary spending, along with a wide analyst price target range from US$6.00 to US$23.00 and a consensus target close to recent trading levels.

These Narratives frame two different ways of looking at the same set of facts. If you want to see how each story is built in full and where your view of Macy's fits on that spectrum, you can start with Curious how numbers become stories that shape markets? Explore Community Narratives and then build or adjust your own version around the numbers that make the most sense to you.

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