• If you are wondering whether Amentum Holdings at US$27.90 is offering fair value or an opportunity, you are not alone in asking what the current price really reflects.
• The stock has seen a mixed return profile, with a 7% decline over the last week and an 8.2% decline over the last month, while still sitting on a 55.9% return over the past year and an 8.5% decline year to date.
• Recent news coverage around Amentum has focused on its position in the commercial services space and how investors are weighing its prospects against broader sector sentiment. This backdrop helps explain why the share price has pulled back in the short term even though the longer term return over one year is positive.
• On our checks, Amentum scores 3 out of 6 on valuation. You can see this in more detail in its valuation score. Next we will walk through the key valuation methods behind that number, while keeping one more powerful way of thinking about value for the end of the article.

Approach 1: Amentum Holdings Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a business could be worth by projecting its future cash flows and discounting them back to today using a required rate of return. It is essentially asking what all those future $ amounts are worth in today's terms.

For Amentum Holdings, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flow projections in $. The latest twelve month free cash flow is about $272.8 million. Analysts provide explicit free cash flow estimates for the next few years, and Simply Wall St extends those out, with the projection for 2028 at $756.0 million. Longer term projections continue out to 2035, with each year discounted back to today to reflect risk and the time value of money.

Adding up these discounted cash flows gives an estimated intrinsic value of $67.27 per share, compared with the current share price of $27.90. On this DCF view, the stock appears 58.5% undervalued, which is a sizeable gap between price and modelled value.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Amentum Holdings is undervalued by 58.5%. Track this in your watchlist or portfolio, or discover 48 more high quality undervalued stocks.

Approach 2: Amentum Holdings Price vs Earnings

For a profitable company, the P/E ratio is a helpful shorthand because it links what you pay directly to the earnings the business is generating today. Investors usually accept a higher P/E when they expect stronger growth or see lower risk, and a lower P/E when growth expectations are modest or risk is higher.

Amentum Holdings is currently trading on a P/E of 69.45x. That is well above the Professional Services industry average of 18.94x and also above the peer group average of 16.01x. On the surface, that suggests the market is applying a richer earnings multiple to Amentum than to many of its listed peers.

Simply Wall St’s Fair Ratio metric estimates what a more tailored P/E might look like, given factors such as Amentum’s earnings growth profile, industry, profit margins, market cap and risk characteristics. Because it adjusts for these company specific inputs, it can be more informative than a simple comparison with peers or the industry. For Amentum, the Fair Ratio is 35.81x, which is materially below the current 69.45x and points to the shares pricing in a higher multiple than this framework suggests.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Amentum Holdings Narrative

Earlier we mentioned that there is an even better way to think about value, and that is through Narratives. These let you set out your own story for Amentum Holdings by linking your expectations for its future revenue, earnings and margins to a financial forecast and a fair value. All of this is available within an easy tool on Simply Wall St's Community page that updates automatically when new news or earnings arrive. You can then compare your Fair Value to the current price and decide if it looks like a buy or a sell for you, whether you lean closer to the US$40 upper analyst view or the US$27 lower view on what the shares might be worth.

Do you think there's more to the story for Amentum Holdings? 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.