Is Mercedes-Benz Group Still Attractive After 22% Share Price Climb and EV Partnership Buzz?

• Wondering if Mercedes-Benz Group shares are a hidden deal or cruising at a premium? You are not alone, with investors everywhere trying to make sense of its current value.
• The stock has been on a smooth upward ride, gaining 2.1% over the last week, 13.0% in the past month, and an impressive 22.2% over the last year.
• Recent buzz in the auto sector, including fresh strategic partnerships and continued momentum behind electric vehicle initiatives, has kept investors' attention firmly on Mercedes-Benz Group. These developments have helped support recent price movements, fueling conversations about future growth possibilities.
• Currently, Mercedes-Benz Group scores a 4 out of 6 on our valuation scorecard, showing positive signals but leaving room for debate. Next, we will break down the key approaches to valuing the stock, and later in the article we will highlight a smarter way to understand whether it is truly trading at a bargain.

Mercedes-Benz Group delivered 22.2% returns over the last year. See how this stacks up to the rest of the Auto industry.

Approach 1: Mercedes-Benz Group Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates what a company is worth today by projecting its future cash flows and then discounting them back to their present value. This approach provides a fundamental valuation based on the company's ability to generate cash for its shareholders over time.

Mercedes-Benz Group’s DCF uses the 2 Stage Free Cash Flow to Equity model. The company's most recent reported Free Cash Flow stands at €13.0 billion. Analysts forecast a slight dip in annual cash flow followed by gradual increases, with free cash flow projected at €6.0 billion by 2029. Looking further ahead, extrapolated figures suggest cash flows will remain robust through the next decade, as continued investments and innovation drive growth.

This analysis results in an estimated intrinsic value of €73.37 per share. Compared to the company's current share price, this figure implies the stock is trading at an 18.8% discount. This suggests the share price may be lower than the value derived from its cash-generating potential.

In summary, the numbers suggest an attractive opportunity for investors who believe in Mercedes-Benz Group’s ability to keep delivering strong financial performance in the years ahead.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Mercedes-Benz Group is undervalued by 18.8%. Track this in your watchlist or portfolio, or discover 885 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Mercedes-Benz Group.

Approach 2: Mercedes-Benz Group Price vs Earnings

The Price-to-Earnings (PE) ratio is an effective way to value profitable companies like Mercedes-Benz Group because it relates share price directly to the company’s earnings, helping investors gauge whether the stock is fairly priced given its ability to generate profits. This metric is especially meaningful for established firms with steady earnings streams. It allows straightforward comparison with industry peers and historical norms.

A "normal" or "fair" PE ratio depends on several factors, most notably expected earnings growth and perceived business risks. Companies with robust growth prospects and lower risks typically command higher PE ratios, as investors are willing to pay more today for anticipated future earnings. Conversely, slower growth or higher uncertainty usually results in a lower PE ratio being considered fair for a stock.

Currently, Mercedes-Benz Group trades at a PE ratio of 9.16x. This figure stands well below the broader Auto industry average of 18.42x, and it is also below the peer group average of 18.25x. While these comparisons might suggest a discount, context matters. Simply Wall St’s proprietary Fair Ratio model suggests a fair PE for Mercedes-Benz Group would be 12.40x, reflecting a tailored benchmark based on earnings growth, margin profile, market cap and industry-specific factors. This approach is more meaningful than simply measuring against broad industry or peer averages because it accounts for the unique strengths and risks of the company.

Comparing the current PE ratio of 9.16x to the Fair Ratio of 12.40x indicates that Mercedes-Benz Group’s stock is undervalued based on this preferred multiple, as it is trading below what would be expected given its business fundamentals.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1411 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Mercedes-Benz Group Narrative

Earlier, we mentioned there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple tool anyone can use to express the story they believe about a company, capturing your perspective on things like future revenue, earnings, and margins, along with your own fair value estimate.

This approach links the company’s story directly to a financial forecast and then calculates a fair value tailored to your assumptions, helping you see where your view fits compared to others. Narratives are available within the Simply Wall St Community page and used by millions of investors. This makes it easy and accessible to build and share your own, even as the numbers and projections evolve over time.

By comparing your Narrative’s fair value to the current share price, you get a truly dynamic way to decide if now is the right time to buy, hold, or sell. Unlike static models, Narratives automatically update whenever fresh company news, earnings, or analyst revisions come in, so your analysis always stays relevant and insightful.

For example, with Mercedes-Benz Group, some investors have a bullish Narrative with an €83.0 fair value reflecting optimism about electrification and premium margins. Others see only €40.0 as warranted given trade tensions and China’s demand, demonstrating how Narratives empower different viewpoints using the same data.

Do you think there's more to the story for Mercedes-Benz Group? 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.