• Wondering if Formula One Group at around US$89.54 is priced fairly or if the market is missing something? This article looks at what the current valuation signals might be telling you.
• The stock is down about 5.2% over the past week and 1.0% over the past month, with returns also lower year to date at 8.7% and over the last year at 7.4%, even though the 3 year and 5 year returns sit at 26.4% and 108.4% respectively.
• Recent headlines around Formula One Group have kept attention on the long term appeal of the sport and the commercial value of media rights, sponsorships and new markets. This helps frame how investors think about the stock. At the same time, discussion about the broader appeal of the racing calendar and potential new fans gives context to why some investors may be reassessing what they are willing to pay.
• Simply Wall St currently gives Formula One Group a value score of 2 out of 6. Next up is a closer look at traditional valuation methods like DCFs and multiples, and then a different way of thinking about value that can help tie all these signals together by the end of the article.

Formula One Group scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Formula One Group Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes projected future cash flows, discounts them back to today using a required rate of return, and sums them to estimate what the stock could be worth right now.

For Formula One Group, Simply Wall St uses a 2 Stage Free Cash Flow to Equity model based on cash flow projections. The latest trailing twelve month free cash flow is about $569m. Analyst and extrapolated estimates suggest free cash flow reaching around $1.52b by 2030, with interim projections between 2026 and 2035 ranging from roughly $1.02b to $2.13b. All figures are expressed in dollars and then discounted back to today.

Putting these discounted cash flows together gives an estimated intrinsic value of about $97.99 per share. Against a current share price of around $89.54, this implies an 8.6% discount, which points to Formula One Group trading close to the DCF estimate rather than at a large gap.

Result: ABOUT RIGHT

Formula One Group is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Approach 2: Formula One Group Price vs Earnings

P/E is a common way to look at valuation for profitable companies because it links what you pay for each share to the earnings that support that share today. In general, higher growth expectations and lower perceived risk can support a higher P/E, while slower growth or higher risk usually mean a lower, more conservative range is sensible.

Formula One Group currently trades on a P/E of about 101.0x. That compares with an Entertainment industry average of roughly 28.0x and a peer group average of around 50.8x. On those simple comparisons, the stock sits well above both its industry and peers.

Simply Wall St’s Fair Ratio for Formula One Group is 25.8x. This is a proprietary estimate of what a reasonable P/E could be, given factors such as earnings growth, profit margins, industry, market cap and risk profile. Because it blends these into a single number, it can be more tailored than a plain industry or peer comparison, which treats very different companies as if they were the same. Set against the current 101.0x P/E, the Fair Ratio suggests the stock is trading at a richer level than those fundamentals might typically support.

Result: OVERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 19 top founder-led companies.

Upgrade Your Decision Making: Choose your Formula One Group Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St’s Community page let you connect the story you believe about Formula One Group to a set of forecasts and a fair value, then compare that fair value to the current price. The most cautious published narrative here points to a fair value of about US$53.37 and the most optimistic one points to about US$135. Both of these update as new earnings, news or fan trends emerge, so you can quickly see how different views on future revenue, margins and risk translate into different decisions about whether the stock looks expensive or attractive to you.

For Formula One Group, we will make it really easy for you with previews of two leading Formula One Group narratives:

Broadly, the Community splits into investors who think the stock has more room to run and those who see more risk building beneath the surface. Here is how those two views line up on fair value, growth assumptions, and the story behind the numbers.

Fair value in this bullish narrative: US$135.00 per share.

Current price compared with this fair value: trading about 33.7% below that narrative fair value on the latest US$89.54 close.

Revenue growth assumption used in this narrative: 10.6% a year.

• Assumes a durable race promotion model, with a growing global fan base, stronger digital engagement and premium live experiences supporting media, sponsorship and ticketing revenue.
• Builds in ongoing benefits from cost controls and diversified income streams, including F1 TV, experiential concepts like F1 Arcade and expanded hospitality and licensing.
• Accepts meaningful risks around environmental pressure, media fragmentation, geopolitics and overexpansion, but concludes that resilient cash flows and a premium P/E multiple can still justify a fair value of US$135.

Fair value in this cautious narrative: US$53.37 per share.

Current price compared with this fair value: trading about 40.0% above that narrative fair value on the latest US$89.54 close.

Revenue growth assumption used in this narrative: 6.0% a year.

• Accepts that Formula One’s profile is very high after series like Drive to Survive and recent film projects, but argues that the sport is at a crossroads as rule changes reshape how the cars perform.
• Highlights driver criticism of the new regulations, concerns about race quality, safety questions and the risk that high profile drivers or long standing fans disengage from the sport.
• Frames the brand as the core asset and argues that if the racing product disappoints, the value of media rights, sponsorships and race hosting demand could weaken, making the stock a riskier proposition at current levels.

If you want to see how other Community members are framing these trade offs, along with different fair values and risk checks, it is worth going straight to the full narrative set for Formula One Group and comparing where your view sits next to theirs: See what the community is saying about Formula One Group.

Do you think there's more to the story for Formula One Group? 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.