• If you are wondering whether Sensient Technologies at around US$94.98 is offering fair value or a margin of safety, you are not alone.
• The stock is roughly flat over the past week with a 0.9% decline, yet it shows returns of 1.6% over the past month and year to date, and 29.3% over the last year. These changes may have influenced how investors think about its potential and risk.
• Recent coverage of Sensient has focused on giving investors an updated evergreen view of the business and its share price, aiming to put these return figures into context. That backdrop sets the scene for a closer look at whether the current share price lines up with what the underlying fundamentals might support.
• Right now, Sensient scores 1 out of 6 on our valuation checks. Next we will look at how different valuation methods assess the stock, and then finish with a way to understand valuation that goes beyond the usual models.

Sensient Technologies scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Sensient Technologies Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes estimates of the cash a business might generate in the future and discounts those amounts back to today, aiming to arrive at an estimate of what the company could be worth right now.

For Sensient Technologies, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $23.7 million. Analysts and internal estimates project free cash flow reaching $77.95 million in 2026 and $132.40 million in 2028, with further annual projections out to 2035 extrapolated by Simply Wall St using a tapering growth profile.

When those projected cash flows are discounted back to today, the model arrives at an intrinsic value of about $88.80 per share. Compared with a current share price around $94.98, this implies the stock is roughly 7.0% above the DCF estimate. On this basis, the model suggests Sensient is close to fully valued with only a modest premium.

Result: ABOUT RIGHT

Sensient Technologies 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: Sensient Technologies Price vs Earnings

For a profitable company like Sensient Technologies, the P/E ratio is a straightforward way to think about what you are paying for each dollar of earnings. Investors typically accept a higher P/E when they expect stronger earnings growth or see the business as lower risk, and a lower P/E when growth expectations or perceived risk are more subdued.

Sensient currently trades on a P/E of about 29.0x. That sits above the Chemicals industry average of roughly 23.8x and the peer group average of around 25.7x. This suggests the market is currently paying a higher price per dollar of earnings than for many sector peers.

Simply Wall St’s Fair Ratio for Sensient is 21.9x. This is a proprietary estimate of what P/E might make sense given factors such as the company’s earnings profile, profit margins, risk characteristics, size and its industry. Because it incorporates these elements directly, the Fair Ratio can give a more tailored view than a simple comparison with broad industry or peer averages.

Comparing the current P/E of 29.0x with the Fair Ratio of 21.9x, the shares screen as trading at a premium on this metric.

Result: OVERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1425 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Sensient Technologies Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, which Simply Wall St makes available on the Community page used by millions of investors.

A Narrative is your story about a company, where you set out your view of Sensient Technologies future revenue, earnings and margins, and then link those assumptions to a clear fair value number instead of relying only on past ratios.

Because a Narrative connects the company’s story to a financial forecast and then to a fair value, you can compare that fair value with the current share price and decide for yourself whether Sensient looks attractive, expensive, or somewhere in between. Your view then automatically refreshes when new information such as earnings or news is added to the platform.

For example, one Sensient Technologies Narrative on Simply Wall St might build in very cautious revenue growth and a lower profit margin and arrive at a fair value below the current price. Another could assume stronger revenue growth and higher margins that support a fair value above the current price.

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