Autoliv (ALV) Stock May Trade At A 48% Discount To Cash Flow

Autoliv has delivered a 33.6% gain over the past 5 years, yet the recent pullback in the share price raises a different question for you. Is the current US$109.76 price tag still in line with what the business can generate in cash over time, based on its own cash flows rather than short term sentiment?

• A 33.6% return over 5 years puts real weight on whether that past performance is supported by the stream of cash the business can produce in the future.
• As a safety systems manufacturer that tends to require steady investment in production and technology, Autoliv's long term value depends heavily on how efficiently profits convert to cash and how much capital the company needs to keep those cash flows coming.
• What if you looked at Autoliv through its earnings instead? See why Autoliv's 12.5x P/E tells a different valuation story.

The issue now is whether that recent share price, after a weaker run this year, still lines up with the intrinsic value suggested by Autoliv's cash flows.

If you want to test the same cash flow question you are asking of Autoliv against a broader set of opportunities, take a look at 29 high quality undervalued stocks.

Is Autoliv Still Cheap on Cash Flow?

The Discounted Cash Flow (DCF) model here focuses on what Autoliv can return to shareholders in pure cash terms. Over the last twelve months the business generated about $641.7 million in free cash flow, and the projections used in the model assume that this cash engine keeps growing rather than shrinking.

Analysts supplying the DCF inputs expect free cash flow to reach $778.15 million by 2028, with further increases pencilled in across the following years, which points to a company treated more like a steady cash generator than a turnaround. When those future streams are discounted back and compared with the current US$109.76 share price, the DCF output suggests Autoliv's estimated intrinsic value sits substantially above where the stock trades today. Find out what Autoliv could be worth using our Discounted Cash Flow (DCF) estimate.

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

Narratives for Autoliv pick up where the cash flow puzzle leaves off. They spell out which combinations of growth, margins and earnings paths would need to hold for the stock to be worth materially more or less than the current price, and they live on Simply Wall St's Community page. Each scenario links a fair value estimate to a specific storyline about Autoliv's possible catalysts and key risks so you can later see which version of events is actually unfolding.

One of the top community narratives on Autoliv: 19% undervalued

"Ongoing efficiency initiatives including automation, digitalization and direct labor reductions have moved forward, with about 1,900 direct production roles reduced..."

Discover why this Narrative puts Autoliv at 19% undervalued.

One more angle on Autoliv that could change the story

Cash flows and share prices only tell part of the story for Autoliv, because the real question is who is steering the ship and what incentives guide their decisions. See who runs Autoliv and how they are paid.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com