• Investors may be wondering whether Macy's current share price still offers value after a strong run, or if most of the opportunity has already been priced in.
• The stock closed at US$19.30, with a 7 day return of a 4.5% decline, a 30 day return of 9.8%, a year to date return of a 15.2% decline, and a 1 year return of 76.8%. This gives you a mix of recent pullbacks and strong longer term gains to consider.
• Recent headlines have focused on Macy's as a turnaround retail name and as a stock that has attracted renewed interest from investors. These stories help explain why the share price performance over the past year looks very different from the shorter term moves.
• Macy's currently holds a valuation score of 5 out of 6, suggesting that most of the valuation checks point to potential undervaluation. The next sections will walk through the methods behind that score, with an even more useful way to think about value saved for the end of the article.

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

A Discounted Cash Flow model looks at the cash Macy's is expected to generate in the future, then discounts those projected cash flows back to today to estimate what the business might be worth right now.

Macy's last twelve months Free Cash Flow is about $578.2 million. Using a 2 Stage Free Cash Flow to Equity model, analysts and extrapolated estimates suggest Free Cash Flow could reach around $1.1 billion in 2035, with interim projections such as $664.5 million in 2026 and $775.5 million in 2028. Simply Wall St projects these ten year cash flows, discounts each year back to today using a required return, and then adds a terminal value for cash flows beyond the forecast period.

On this basis, the model estimates an intrinsic value of about $35.10 per share, compared with the recent share price of $19.30. That gap implies the stock is around 45.0% undervalued according to this DCF approach.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Macy's is undervalued by 45.0%. Track this in your watchlist or portfolio, or discover 52 more high quality undervalued stocks.

Approach 2: Macy's Price vs Earnings

For profitable companies like Macy's, the P/E ratio is a common way to gauge what the market is willing to pay for each dollar of earnings. It is simple, familiar, and directly links the share price to the bottom line that ultimately matters to shareholders.

What counts as a "normal" or "fair" P/E depends on how the market views a company's growth prospects and risk. Higher expected growth or lower perceived risk can support a higher P/E, while slower growth or higher risk typically lead to a lower multiple.

Macy's currently trades on a P/E of 7.93x, compared with an industry average of 20.19x for Multiline Retail and a peer average of 21.01x. Simply Wall St also estimates a Fair Ratio of 12.97x using its own model.

This Fair Ratio is a proprietary estimate of the P/E Macy's might trade on given factors such as earnings growth, industry, profit margins, market cap and specific risks. It can be more informative than a simple comparison to peers or industry averages because it aims to reflect the company's own profile rather than treating all retailers as identical.

Comparing the Fair Ratio of 12.97x with the current P/E of 7.93x shows that Macy's shares are trading below this model-based reference point.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Macy's Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives bring that idea to life by letting you attach a clear story about Macy's to the numbers you believe in, linking your view of its future revenue, earnings and margins to a Fair Value that you can compare with the current price on Simply Wall St's Community page.

A Narrative is simply your own storyline for the business that connects what you think is happening at Macy's to a forecast and a Fair Value, whether that story focuses on real estate sales and digital scale, or on long running store closures and profit pressure.

Because Narratives on Simply Wall St sit on top of live data, they refresh when new information like earnings, guidance or news arrives. This means your Fair Value stays aligned with the latest inputs rather than a one off spreadsheet.

For Macy's, one investor might build a bullish Narrative that lines up with a Fair Value of around US$24.00 per share. Another might plug in far more cautious assumptions that point to a Fair Value closer to US$6.00. Comparing each Fair Value with the current share price then helps each investor decide whether the stock fits their own buy, hold or sell rules.

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

Fair Value: US$24.43

Implied undervaluation vs last close: around 21%.

Revenue growth assumption: 5.57%.

• Uses Macy's owned real estate as a financial lever, with plans to raise about US$600m to US$750m over three years to support liquidity, reduce debt and fund new investments.
• Leans on more than US$7b in annual digital sales, treating Macy's as a large e commerce player building a media network around its online traffic.
• Accepts that there are ongoing business challenges, but backs a scenario where assets and digital scale support a Fair Value above the current share price.

Fair Value: US$6.00

Implied overvaluation vs last close: around 222%.

Revenue growth assumption: 8.91% annual decline.

• Assumes department store pressures continue, with more spending moving to e commerce players, other experiences and discount formats, which weighs on Macy's traffic and market share.
• Highlights heavy fixed costs, a large store base and an aging core customer as ongoing margin headwinds despite efforts to modernize the business.
• Ties all of this to a Fair Value of US$6.00, reflecting the bearish analyst cohort that sees the current price as too high even if earnings improve.

These two Narratives sit at opposite ends of the current valuation range and show how different assumptions about real estate, digital growth, store economics and customer behavior can lead to very different Fair Values for the same stock. Your next step is to decide which story, or combination of stories, aligns best with your own view of Macy's risk and return trade off.

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.