• Wondering if PPG Industries at around US$109.80 is offering value or just holding steady at a fair price? This breakdown will help you frame that question clearly.
• The stock has returned 5.2% year to date and 9.9% over the last year, while the 3 year and 5 year returns of 16.3% and 29.1% declines show a very different experience for longer term holders.
• Recent attention on PPG Industries has focused on its role in the broader materials sector and how sentiment has shifted around coatings and specialty materials companies. This context helps explain why shorter term returns differ from the multi year track record.
• Simply Wall St currently assigns PPG Industries a valuation score of 5/6. The sections that follow will walk through common valuation approaches, then finish with a framework that can help you interpret that score more effectively.

Approach 1: PPG Industries Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model looks at the cash PPG Industries is expected to generate in the future and then discounts those amounts back to today using a required rate of return. The aim is to estimate what the company could be worth based purely on those projected cash flows.

PPG Industries last twelve month free cash flow is about $1.27b. Using a 2 Stage Free Cash Flow to Equity model, analysts and internal estimates project free cash flow reaching about $1.88b by 2035. Near term projections up to 2029 are based on analyst estimates, while later years are extrapolated by Simply Wall St to extend the cash flow curve.

When all these future cash flows are discounted back to today, the model arrives at an estimated intrinsic value of about $161.29 per share. Compared with the recent share price around $109.80, this implies the stock is 31.9% undervalued according to this DCF framework.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests PPG Industries is undervalued by 31.9%. Track this in your watchlist or portfolio, or discover 55 more high quality undervalued stocks.

Approach 2: PPG Industries Price vs Earnings

For a profitable company like PPG Industries, the P/E ratio is a useful way to see what investors are currently willing to pay for each dollar of earnings. In general, higher growth expectations and lower perceived risk can support a higher P/E, while slower expected growth or higher risk usually point to a lower, more conservative P/E being seen as fair.

Right now, PPG Industries trades on a P/E of 15.64x. That sits below the Chemicals industry average of 29.75x and well below a peer group average of 42.32x, which suggests the market is assigning a lower earnings multiple to PPG Industries than to many of its listed peers.

Simply Wall St’s Fair Ratio for PPG Industries is 20.58x. This is a proprietary estimate of what PPG Industries P/E could reasonably be, given factors such as its earnings profile, industry, profit margins, market value and risk characteristics. Because it blends these company specific drivers, the Fair Ratio offers a more tailored reference point than a simple comparison with peers or the broader industry. Set against this Fair Ratio, the current 15.64x P/E indicates that PPG Industries shares are trading below that reference level.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your PPG Industries Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives take the next step by letting you write a clear story for PPG Industries that connects your view of its business to specific numbers for future revenue, earnings and margins, then turns that into a Fair Value that you can compare with today’s price.

On Simply Wall St’s Community page, Narratives let you and other investors create these story plus forecast combinations in an accessible format. They then show at a glance whether your Fair Value suggests PPG Industries looks cheap or expensive against the current market price and how that gap changes over time.

Because Narratives are refreshed when new information such as earnings, guidance or major news is added, they help you keep a living view of the thesis rather than a one off model that goes out of date quickly.

For example, one PPG Industries Narrative on the platform currently points to a Fair Value of about US$152.76 built on assumptions like 16% revenue growth and an 8.48% profit margin with a P/E of 20x. Another more cautious Narrative points to around US$121.75 based on 3.22% revenue growth, a 10.72% profit margin and a P/E of 17.37x. This shows how different assumptions and stories about the same company can lead to very different conclusions about value.

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