• If you are wondering whether Garrett Motion’s recent share price puts it in bargain or stretched territory, the key question is how that price lines up with the company’s underlying value.
• The stock last closed at US$25.87, with returns of 23.1% over 7 days, 40.5% over 30 days, 48.8% year to date, 142.8% over 1 year, 233.0% over 3 years and 367.2% over 5 years. This naturally raises questions about how much of the story is already reflected in the price.
• Recent coverage has focused on Garrett Motion’s position in auto components and the attention that comes with strong multi year share price performance. For investors, this context helps frame whether the stock’s momentum is being driven by changing expectations, shifting risk views or a reassessment of what the business could be worth.
• On Simply Wall St’s valuation checks, Garrett Motion scores a 5 out of 6. This sets up a closer look at how different valuation methods stack up, and why a more holistic way of thinking about value at the end of this article may matter even more.

Approach 1: Garrett Motion Discounted Cash Flow (DCF) Analysis

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

For Garrett Motion, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $365.1 million. Analysts provide free cash flow estimates for the next few years, and Simply Wall St extends these further, with the ten year projection for 2035 sitting at $396.5 million, discounted back to $173.3 million in today’s terms.

Adding all discounted cash flows and a terminal value gives an estimated intrinsic value of about $32.88 per share. Compared with the recent share price of $25.87, the DCF output suggests the stock trades at an implied 21.3% discount. On this model alone, the shares appear to be undervalued.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Garrett Motion is undervalued by 21.3%. Track this in your watchlist or portfolio, or discover 50 more high quality undervalued stocks.

Approach 2: Garrett Motion Price vs Earnings

For profitable companies, the P/E ratio is a useful shorthand because it ties what you pay directly to the earnings the business is currently generating. The higher the expected growth and the lower the perceived risk, the higher a “normal” or “fair” P/E ratio investors are usually willing to accept.

Garrett Motion currently trades on a P/E of 14.15x. That sits below the Auto Components industry average P/E of 18.65x and below the peer group average of 16.86x, which may catch your eye if you are comparing it with similar businesses.

Simply Wall St’s Fair Ratio for Garrett Motion is 17.07x. This is a proprietary estimate of what the P/E might be, given factors such as the company’s earnings growth profile, profit margins, risk characteristics, industry and market cap. Because it blends these fundamentals rather than relying only on simple peer or sector comparisons, it can offer a more tailored reference point.

With the current P/E of 14.15x sitting below the Fair Ratio of 17.07x, this approach suggests the shares are trading at a discount.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Garrett Motion Narrative

Earlier it was mentioned that there is an even better way to understand valuation. On Simply Wall St that starts with Narratives, where you combine your view of Garrett Motion’s story with explicit assumptions for future revenue, earnings, margins and a fair value. You can then see how that fair value compares to the current price to help guide buy or sell decisions, watch your view update automatically when new news or earnings arrive, and compare your take with others on the Community page. For example, one Narrative might lean toward the bullish US$24.00 fair value based on confidence in HVAC compressor contracts, electrification exposure, data center cooling and buybacks. Another might lean closer to the US$19.00 fair value if you are more focused on ICE reliance, margin pressure and execution risks.

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