Recent attention on Goodyear Tire & Rubber (GT) stems from its ongoing plan to reshape the business, including completed sales of Off-the-Road tires, Chemicals, and the Dunlop brand, and the use of proceeds to reduce high interest debt.

The recent asset sales and debt reduction have come against a weak share price backdrop, with a 90 day share price return of a 22.4% decline and a 1 year total shareholder return of a 26.6% loss. The recent 7 day share price gain of 6.8% suggests some short term momentum as investors reassess Goodyear's risk profile.

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With the shares down sharply over 1 year, yet trading at a discount to analyst targets and some intrinsic value estimates, the key question is whether Goodyear is still mispriced or if the market already reflects its next phase of growth.

Most Popular Narrative: 27.2% Undervalued

Goodyear's most followed narrative puts fair value at $9.76 per share versus a last close of $7.10. This frames the current price as a discount to future earnings power and balance sheet repair.

The asset sales (OTR, Dunlop, and Chemical business) and strong progress on deleveraging are expected to yield a significantly improved balance sheet and lower interest burden, enhancing Goodyear's ability to reinvest in growth, drive earnings accretion, and reduce financial risk.

Curious what kind of earnings swing needs to happen for this valuation to hold up? The narrative leans on a profit turnaround, steadier revenues, and a future earnings multiple that has to clear today's loss making reality. The full breakdown shows how those moving parts are expected to line up over the next few years.

Result: Fair Value of $9.76 (UNDERVALUED)

However, this depends on profit margins improving from a loss today, while competition from low cost imports and higher tariffs could still pressure earnings.

Next Steps

With the mixed sentiment around Goodyear's turnaround story, it makes sense to review the data yourself and decide how the trade off looks to you, starting with 4 key rewards and 1 important warning sign.

Looking for more investment ideas?

If Goodyear has you thinking about where risk and reward line up best, it is worth widening the lens and checking other opportunities on the Simply Wall St screener.

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• Target steadier return potential by scanning companies with consistent payouts using the 11 dividend fortresses.
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• Prioritise strength by comparing companies highlighted in the solid balance sheet and fundamentals stocks screener (41 results) to see which ones line up with your risk comfort.

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.