• Investors may be wondering if Macy's at around US$21.76 is still offering value after its rebound, or if the easier gains may already have been realized.
• The stock has returned 5.3% over the past week and 10.5% over the past month, while year to date it is down 4.4% but up 91.4% over the past year and 61.0% over three years, with a 45.9% return over five years.
• These moves have kept attention on Macy's, as investors weigh how the business and the broader retail sector are being priced and what that means for potential risk and reward. The sharp 1-year gain in particular encourages a closer look at whether current expectations already reflect the recent optimism around the stock.
• Macy's carries a valuation score of 5 out of 6, which suggests most, but not all, of our checks point to the stock trading below estimated fair value. The rest of this article will walk through those methods before finishing with a more rounded way to think about what that number may mean for you.

Approach 1: Macy's Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model takes Macy's projected future cash flows and discounts them back to today, aiming to estimate what those future streams could be worth in present terms.

Macy's last twelve months Free Cash Flow is about $578.2 million. Using a 2 Stage Free Cash Flow to Equity model, analyst estimates and extrapolated figures point to projected Free Cash Flow of $1,069.6 million in 2035. These projections, which include analyst inputs up to 2028 and Simply Wall St extrapolations thereafter, are all expressed in $ and then discounted back to today.

Putting those discounted cash flows together produces an estimated intrinsic value of about $35.15 per share. Against a current share price of roughly $21.76, this indicates the stock trades at a 38.1% discount to that DCF estimate, which suggests Macy's may be undervalued on this specific cash flow view.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Macy's is undervalued by 38.1%. Track this in your watchlist or portfolio, or discover 46 more high quality undervalued stocks.

Approach 2: Macy's Price vs Earnings

For a profitable company, the P/E ratio is a useful way to see how much you are paying for each dollar of earnings, which makes it a common starting point when you compare stocks in the same sector.

What counts as a "normal" P/E depends on how the market views a company’s growth potential and risks. Higher expected growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk can point to a lower "fair" multiple.

Macy's currently trades on a P/E of 8.94x. This sits below the Multiline Retail industry average P/E of 18.79x and below the peer group average of 15.51x. Simply Wall St also calculates a Fair Ratio of 14.31x, which reflects factors such as Macy's earnings growth profile, profit margins, industry, market cap and company specific risks.

The Fair Ratio is more tailored than a simple industry or peer comparison because it adjusts for Macy's own characteristics rather than assuming that every retailer deserves the same multiple.

Comparing Macy's current P/E of 8.94x with the Fair Ratio of 14.31x suggests the stock is trading below that fair multiple estimate.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose Your Macy's Narrative

Earlier a better way to understand valuation was mentioned, so this is where Narratives come in, giving you a simple way to connect your story about Macy's to concrete numbers such as fair value, future revenue, earnings and margins. You can then compare that fair value to the current share price to decide whether the stock looks attractive, fully priced or expensive on your terms.

On Simply Wall St's Community page, Narratives are an easy tool used by millions of investors. You can see and adjust forecasts and assumptions instead of just accepting a single target price or P/E comparison.

Each Narrative ties together a clear thesis, a financial forecast and a fair value. It then updates automatically when new information such as news, earnings or guidance is added, so your view does not stay stuck on old data.

For Macy's, one investor might build a bullish Narrative around its real estate, digital sales of more than US$7b, media network plans and a fair value of US$25.00. Another might focus on years of store closures, takeover uncertainty and long term pressure on sales and margins, lean toward a lower fair value closer to US$9.00, and use those side by side to decide which story seems more reasonable.

For Macy's, however, we will make it really easy for you with previews of two leading Macy's Narratives:

Each one connects a clear story about the business to specific numbers such as fair value, revenue trends and margins. This can help you quickly see which set of assumptions feels closer to your own view before you adjust anything yourself.

Fair value in this bullish Narrative: US$24.43 per share.

At the recent price of about US$21.76, this Narrative views Macy's as trading roughly 11% below its fair value estimate.

Revenue growth assumption: 5.57% a year.

• Macy's large real estate portfolio is viewed as a financial cushion, with planned sales of US$600m to US$750m over three years providing flexibility to manage debt and reinvest.
• More than US$7b in annual digital sales and plans for a media network frame Macy's as a sizable e commerce player with room to further monetize online traffic.
• The bear side of this same Narrative flags years of store closures, takeover uncertainty and long term pressure on sales and margins as key risks that could limit any recovery.

Fair value in this more cautious Narrative: US$19.40 per share.

At about US$21.76, this Narrative implies the stock is trading close to 12% above its fair value estimate.

Revenue growth assumption: revenue is expected to decline about 6.40% a year.

• Analysts behind this view see omni channel investments, store optimization and portfolio pruning improving efficiency and supporting margins, while also pointing to luxury and off price formats as important contributors.
• The same Narrative highlights risks from e commerce competitors, tariff related margin pressure, ongoing store closures and the need for cost control to support earnings.
• On these assumptions, the consensus price target of US$19.40, with a wide US$9.00 to US$25.00 range, suggests the stock is close to fairly priced on average. This means your stance depends on how much confidence you place in those revenue, margin and P/E inputs.

If you want a fuller picture before deciding how Macy's fits into your portfolio, it is worth seeing how these Narratives plug into detailed forecasts, risks and valuation workups. You can then stress test them against your own expectations. To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Macy's on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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