EUR
en
The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future free cash flows and discounting them back to today using an appropriate rate. In other words, it is a way of asking what all of L'Air Liquide's expected future cash generation is worth in today's money.
At present, L'Air Liquide generates €3.05 billion in free cash flow. Analyst consensus provides projections up to five years, estimating consistent annual growth in free cash flow, with Simply Wall St extrapolating future years. By 2029, free cash flow is forecast to reach €4.08 billion, and the model projects just under €4.7 billion annually a decade from now. These are solid, steadily increasing figures and reflect confidence in the company's ability to continue generating significant cash.
Based on this model, the estimated intrinsic value of L'Air Liquide stands at €141.77 per share. Currently, the share price is about 19.1% higher than this estimate, which suggests the stock trades at a significant premium to what the DCF model considers fair value.
The price-to-earnings (PE) ratio is a time-tested valuation metric, especially useful when analyzing profitable companies like L'Air Liquide. It provides a snapshot of how much investors are willing to pay for every euro of current earnings, making it an accessible way to gauge market expectations.
Growth prospects and risk both play critical roles in shaping what constitutes a “normal” or “fair” PE ratio. Fast-growing businesses and those facing less risk typically command higher PE multiples because investors are willing to pay a premium for future profits and stability.
L'Air Liquide’s current PE ratio sits at 28.4x, noticeably higher than both the industry average of about 21.9x and the peer average of 24.4x. This suggests that the market is placing a premium on the company relative to its direct competitors and the broader chemicals sector. However, Simply Wall St’s proprietary “Fair Ratio” is 24.9x, reflecting a blend of factors including L'Air Liquide’s earnings growth outlook, margins, industry positioning, market capitalization, and risk profile.
Unlike basic peer or industry comparisons, the Fair Ratio is a more nuanced benchmark tailored to a company’s unique fundamentals. It helps investors avoid the pitfalls of one-size-fits-all analysis by considering elements that drive true value, rather than just broad averages.
Comparing the Fair Ratio of 24.9x to the current PE of 28.4x, L'Air Liquide appears to be overvalued on this metric, with its stock price factoring in more optimism than its underlying fundamentals might support.
Earlier, we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a clear story investors create about a company like L'Air Liquide, weaving together their view of where the business is heading and what it is worth based on future revenue, earnings, and profit margin assumptions.
With Narratives, your view on L'Air Liquide is not just a gut feeling; it becomes a structured perspective that connects your expectations for the company to a financial forecast and an up-to-date Fair Value, helping you decide if the current price offers an opportunity or a warning signal.
This approach is easy to use and accessible for everyone. On Simply Wall St’s Community page, millions of investors are already sharing their Narratives, updating them as new information, like quarterly reports or major news, comes in. As a result, when facts change, so does your Narrative’s fair value, making your decisions far more dynamic than traditional ratios or models.
Narratives make it simple to compare your forecasted Fair Value to today’s share price so you can decide whether to buy, hold, or sell. For example, right now, the most optimistic Narrative for L'Air Liquide values the company at €216.0 per share, while the most cautious sees fair value at just €154.0. This shows how much your own research and story can shape your investment decisions.
Bookmark
Daniel Féau processes personal data in order to optimise communication with our sales leads, our future clients and our established clients.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.