- Wondering if Eastman Chemical at around US$75.87 is offering real value or just fair pricing? This article walks through what the numbers say about the stock.
- The share price return sits at 2.4% over the past week, 7.7% over the past month, 17.9% year to date and 1.6% over the past year, against a longer-term picture that includes a 3.5% return over three years and a decline of 29.7% over five years.
- Recent coverage has focused on Eastman Chemical's role as a diversified materials producer, with commentary often centering on how the business is positioned within broader chemicals and materials demand trends. This context helps frame why shorter-term returns differ from the weaker five-year result and why investors are reassessing what they are willing to pay for the stock.
- On Simply Wall St's valuation model, Eastman Chemical earns a value score of 5 out of 6. This sets up a closer look at how different valuation approaches judge the stock today and points to an even more useful way of thinking about valuation that will be covered at the end of this article.
Find out why Eastman Chemical's 1.6% return over the last year is lagging behind its peers.
Approach 1: Eastman Chemical Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model projects a company’s future cash flows and then discounts those amounts back to today to estimate what the business could be worth right now.
For Eastman Chemical, the latest twelve month Free Cash Flow stands at about $393.9 million. Simply Wall St uses a 2 Stage Free Cash Flow to Equity model, which blends analyst estimates with extrapolated figures. Analyst projections extend out a few years, and by 2028 Free Cash Flow is projected at $767.9 million. Further out, the model continues with a set of extrapolated Free Cash Flow estimates up to 2035, all expressed in dollars.
When all those projected cash flows are discounted back to today, the DCF model points to an estimated intrinsic value of $134.73 per share. Compared with the current share price of about $75.87, this implies the stock is 43.7% undervalued according to this method.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Eastman Chemical is undervalued by 43.7%. Track this in your watchlist or portfolio, or discover 45 more high quality undervalued stocks.
Approach 2: Eastman Chemical Price vs Earnings
For a profitable company, the P/E ratio is a useful shorthand for how much investors are paying for each dollar of earnings, which makes it a common anchor when you are comparing listed stocks.
What counts as a “normal” P/E depends on what the market expects for future earnings growth and how risky those earnings are perceived to be. Higher expected growth or lower perceived risk can justify a higher multiple, while lower growth or higher risk usually means a lower one.
Eastman Chemical currently trades on a P/E of 21.73x. That sits below the Chemicals industry average of 26.82x and also below the broader peer group average of 43.97x, so on simple comparisons the stock screens as cheaper than many peers.
Simply Wall St’s Fair Ratio for Eastman Chemical is 23.17x. This is a proprietary estimate of what a “reasonable” P/E could be for the stock, based on factors such as its earnings growth profile, profit margins, industry, market cap and specific risks. Because it incorporates those company specific inputs, it can be more informative than a plain comparison to industry or peer averages alone.
Compared with the Fair Ratio of 23.17x, the current P/E of 21.73x suggests Eastman Chemical trades at a discount on this basis.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Eastman Chemical Narrative
Earlier it was mentioned that there is an even better way to understand valuation. This is where Narratives come in, giving you a simple way to link your view of Eastman Chemical’s story to a financial forecast and then to a Fair Value that you can compare with today’s share price.
On Simply Wall St’s Community page, Narratives let you set the story you believe in. For example, you might prefer a more cautious view that points to a Fair Value around US$67.00, or a more optimistic view closer to US$96.01. You can then tie that to explicit assumptions about future revenue, earnings, margins and the P/E you think is reasonable.
Narratives live on the platform used by millions of investors and are updated automatically when new information like earnings or news is released. This allows you to quickly see how your Fair Value moves against the current price and decide for yourself whether Eastman Chemical looks expensive, cheap or roughly in line with your expectations at any point in time.
For Eastman Chemical however we will make it really easy for you with previews of two leading Eastman Chemical Narratives:
Fair Value: US$96.01
Implied discount to Fair Value: about 21% compared with the recent price around US$75.87, based on the Simply Wall St narrative Fair Value.
Revenue growth assumption: 4.69% a year
- Focuses on recycling projects and flexible manufacturing that are expected to support earnings quality and reduce swings in profitability over time.
- Assumes tighter links to auto and packaging customers, especially in higher value EV glass and specialty materials, support stronger margins.
- Flags risks around trade tensions, feedstock costs, regulation and pressure in legacy products that could challenge the earnings path if they worsen.
Fair Value: US$67.68
Implied premium to Fair Value: about 12% compared with the recent price around US$75.87, based on the Simply Wall St narrative Fair Value.
Revenue growth assumption: 9.52% a year
- Centers on Eastman Chemical as a dividend income stock, with a quarterly payout of US$0.83 per share and an indicated yield around 4.3% in the narrative.
- Highlights a record of annual dividend increases, coverage by earnings and free cash flow, and additional support from share buybacks.
- Suggests that while the income profile is attractive, the current price sits above this narrative Fair Value, so the yield and dividend track record are the main reasons investors might stay interested at that level.
If you want to see how other investors are framing Eastman Chemical's story, you can read the full set of Narratives and compare their assumptions side by side using the community tools on Simply Wall St, including sentiment that stretches between these bullish and more cautious views.See what the community is saying about Eastman Chemical
Do you think there's more to the story for Eastman Chemical? 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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