• If you are wondering whether Goodyear Tire & Rubber's current share price reflects its true worth, you are not alone. Many investors are asking if the recent moves are justified by underlying value.
• The stock last closed at US$10.54, with returns of 12.0% over 7 days, 14.2% over 30 days, 18.2% year to date and 25.5% over the past year, while the 3 year and 5 year returns stand at a 2.9% decline and a 25.1% decline respectively.
• Recent price action has put a spotlight on how the market currently views Goodyear Tire & Rubber, with investors weighing shorter term gains against the weaker multi year track record. That context is important for assessing whether today’s valuation still offers a margin of safety or instead reflects a change in how the business is being priced.
• Our Simply Wall St valuation checks give Goodyear Tire & Rubber a 4 out of 6 valuation score, indicating it screens as undervalued on most of the metrics we track. Next, we will walk through those valuation approaches in more detail, then finish with a broader way of thinking about value that can be even more useful than any single model.

Approach 1: Goodyear Tire & Rubber Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company could be worth today by projecting its future cash flows and then discounting those amounts back to the present. It is essentially asking what tomorrow’s cash in your hand is worth in today’s dollars.

For Goodyear Tire & Rubber, the 2 Stage Free Cash Flow to Equity model starts from last twelve month free cash flow of about $437.4 million outflow, then projects a path to positive cash generation. Analyst inputs and extrapolated estimates point to free cash flow of $111.7 million in 2026, rising to $280.9 million by 2028, and further to about $503.5 million by 2035, all in US$ terms.

Adding up those projected cash flows, discounting them back using the model assumptions, and including a terminal value gives an estimated intrinsic value of US$12.58 per share. Compared with the recent share price of US$10.54, this implies a 16.2% discount. Under these model assumptions, the stock currently screens as undervalued on this DCF view.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Goodyear Tire & Rubber is undervalued by 16.2%. Track this in your watchlist or portfolio, or discover 52 more high quality undervalued stocks.

Approach 2: Goodyear Tire & Rubber Price vs Sales

For companies where earnings are weak or volatile, the Price to Sales, or P/S, ratio is often more useful than P/E because it compares the share price with the revenue the business generates, rather than short term profits that can swing with one off items.

What counts as a reasonable P/S ratio depends on factors like how fast revenue is expected to grow and how risky the business is. Higher growth and lower risk can justify a higher multiple, while slower growth or higher risk usually point to a lower, more conservative range.

Goodyear Tire & Rubber currently trades on a P/S of 0.16x, compared with the Auto Components industry average of 0.84x and a peer group average of 9.73x. Simply Wall St’s Fair Ratio for Goodyear, at 0.58x, is a proprietary estimate of what the P/S could be given its earnings growth profile, industry, margins, market cap and risk characteristics.

The Fair Ratio can be more useful than a straight comparison with peers or the broad industry, because it is tailored to Goodyear’s own fundamentals rather than assuming it should trade in line with any single comparison group.

With the Fair Ratio of 0.58x above the current 0.16x, the stock screens as undervalued on this P/S view.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Goodyear Tire & Rubber Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simply your story about Goodyear Tire & Rubber, linked directly to your assumptions for future revenue, earnings, margins and a fair value estimate.

On Simply Wall St’s Community page, used by millions of investors, a Narrative lets you spell out what you think is happening with the business, connect that to a financial forecast, then translate it into a fair value that you can compare with today’s share price to help you decide whether the stock looks attractive or stretched.

Because Narratives on the platform update automatically when new information such as earnings releases or major news is added, your view on Goodyear Tire & Rubber can stay current without you rebuilding a spreadsheet every time something changes.

For example, one Goodyear Tire & Rubber Narrative on the Community page might assume a relatively high fair value per share based on a more optimistic view of future margins. In contrast, another Narrative might sit at a much lower fair value because the author expects more modest revenue growth and uses a higher discount rate.

Do you think there's more to the story for Goodyear Tire & Rubber? 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.