- Wondering whether Woodward at around US$351 per share still offers value, or if most of the upside is already reflected in the price? This article breaks down what the current market price might be implying about the company.
- The stock has been volatile recently, with a 2.9% decline over the last 7 days and a 9.2% decline over the last 30 days, even though the year to date return is 13.0% and the 1 year return is 93.3%.
- Over a longer stretch, Woodward has returned 262.8% over 3 years and 193.6% over 5 years, which places the recent pullback in the context of a much stronger multi year performance. This mix of short term weakness and longer term strength is one reason it can be useful to examine whether the current valuation still aligns with the fundamentals.
- Right now, Woodward scores 1 out of 6 on Simply Wall St's valuation checks, as shown in its valuation score. The next step is to compare what different valuation approaches are indicating about the stock and then consider an alternative way to interpret those signals by the end of this article.
Woodward scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Woodward Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model takes estimates of a company’s future cash flows, then discounts them back to today’s dollars to estimate what the entire business might be worth right now.
For Woodward, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flow projections in $. The latest twelve month free cash flow is about $430.8 million. Analysts supply free cash flow estimates out to 2029, with Simply Wall St extending those projections a further five years using its own assumptions. By 2035, the extrapolated free cash flow figure in the model is $1.1b, with each future year discounted back to today.
Adding these discounted cash flows together gives an estimated intrinsic value of about $304 per share. Compared with the recent share price around $351, the DCF output implies Woodward trades at roughly a 15.5% premium to this estimate, which points to the shares being overvalued on this model alone.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Woodward may be overvalued by 15.5%. Discover 62 high quality undervalued stocks or create your own screener to find better value opportunities.
Approach 2: Woodward Price vs Earnings (P/E)
For a profitable company like Woodward, the P/E ratio is a useful way to think about what you are paying for each dollar of current earnings. Investors usually accept a higher P/E when they expect stronger earnings growth or see lower risk, and a lower P/E when growth expectations are more modest or risks feel higher.
Woodward currently trades on a P/E of 42.8x. That sits above the Aerospace & Defense industry average of 35.7x, but below the peer group average of 49.4x. To move beyond simple comparisons, Simply Wall St uses a proprietary “Fair Ratio” which estimates what a more tailored P/E might be for Woodward, based on factors such as its earnings growth profile, profit margins, industry, market capitalization and risk characteristics.
This Fair Ratio for Woodward is 32.6x, which aims to be more precise than a raw comparison with peers or the wider industry because it adjusts for company specific features rather than assuming one size fits all. Set against the current P/E of 42.8x, this suggests the shares trade above the level that the Fair Ratio model indicates.
Result: OVERVALUED
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Upgrade Your Decision Making: Choose Your Woodward Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced here as simple stories you create about Woodward that connect your view of its aerospace and industrial position to specific assumptions for future revenue, earnings, margins and a Fair Value that you can compare with today’s price.
On Simply Wall St’s Community page, Narratives are an accessible tool used by millions of investors that link a company’s story to a forecast and then to a Fair Value. They automatically refresh as new information such as Woodward’s guidance, dividend changes, buybacks or analyst price targets is added to the platform.
For Woodward, one investor might lean toward a more optimistic Narrative that aligns with a Fair Value around US$450.0, while another might choose a more cautious Narrative closer to US$203.16. By setting up either view as a Narrative, you can continuously see how your chosen Fair Value compares with the live share price to help decide whether you are closer to a buy, hold or sell decision based on your own assumptions rather than a single static metric like the P/E.
Do you think there's more to the story for Woodward? 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.
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