Can Shell (LSE:SHEL) Still Be Called Undervalued After Q2 Profits?

Shell stock has risen 172.9% over the last five years, yet the latest valuation checks still suggest it trades on the cheap side relative to fundamentals. With profits recently supported by higher energy prices and capital returns in focus, investors are weighing whether the current share price already reflects that strength.

• Over the past five years Shell has delivered a 172.9% return, which puts extra weight on whether recent gains are still backed by underlying value.
• Higher earnings from elevated oil and gas prices and new projects can support the current valuation, while geopolitical risks and large capital commitments such as acquisitions may challenge how durable those earnings are.
• On Simply Wall St's checks Shell screens as undervalued in 5 of 6 tests, and the high value score of 5/6 indicates the broader metrics lean cheap rather than fully priced.

The issue now is whether Shell's share price still leaves enough upside compared with what these valuation checks imply.

Find out why Shell's 27.2% return over the last year is lagging behind its peers.

Is Shell a Bargain on Earnings?

The P/E ratio is a simple way to see what the market is willing to pay for Shell’s current earnings. Shell trades on a P/E of about 13.3x, which is slightly below the oil and gas industry average of roughly 14.0x and well below the wider peer group average of around 20.6x.

On Simply Wall St’s fair multiple framework, Shell is assessed at a tailored fair P/E of about 19.9x, based on its size, profitability profile and risk factors. That is a clear gap to the current 13.3x level, which indicates investors are currently paying less per unit of earnings than those model checks suggest could be reasonable. Despite a strong profit backdrop recently highlighted by the Q2 2026 results, the stock still trades at a discount to that fair multiple.

On this P/E yardstick, Shell stock appears undervalued relative to both its customised fair multiple and wider peers.

See what the numbers say about this price — find out in our valuation breakdown.

The Shell Narrative: What Would Justify Today's Price?

Simply Wall St Narratives for Shell pick up where this valuation puzzle leaves off and explain what combination of future growth, margins and earnings would need to hold for Shell's stock to be worth materially more or less than it is today. Rather than presenting a single multiple or headline model result, each Narrative sets out the key assumptions behind its view of fair value so you can track those against Shell's reported numbers over time on the Community page.

Community views on Shell sit far apart, with one side focused on LNG and trading strengths while the other concentrates on earnings risk from expansion and buybacks.

Bull case: 7% undervalued

"With an LNG portfolio exceeding 60 million tons and unparalleled trading capabilities, Shell is the company that benefits most from the volatility in the global gas market..."

Read the full Bull Case to see why Shell could be undervalued

Bear case: 21% overvalued

"The heavy reliance on buybacks and a distribution target of 40% to 50% of cash flow from operations, with 17 consecutive quarters of US$3b or more in buybacks and about 25% of shares repurchased in three years, may leave less flexibility for reinvestment just as new resource access in countries like Iraq, Libya and Venezuela opens up..."

Read the full Bear Case to see why Shell could be overvalued

Do you think there's more to the story for Shell? Head over to our Community to see what others are saying!

The Bottom Line

Shell screens as undervalued on market multiples, with the current P/E sitting below both industry and tailored fair levels. That gap suggests the market is cautious about how sustainable recent earnings and capital returns will be, given geopolitical exposure and heavy buyback and investment plans. The key question is whether Shell can keep converting its LNG, trading and project pipeline strengths into steady cash flows without eroding balance sheet flexibility. The core issue in the bull versus bear debate is whether the current discount compensates investors for those execution and capital allocation risks or whether it fairly reflects them.

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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