- If you are wondering whether RPM International at around US$105 a share offers real value or is just treading water, this article walks through what the current price could mean for you.
- The stock has inched up 2.2% over the last week and 3.7% over the last month, while the return over the last year is down 6.8% and the 3 year and 5 year returns sit at 34.2% and 23.8% respectively.
- Recent coverage has focused on RPM International's position within the broader chemicals sector and how investors are weighing its long term track record against more mixed shorter term share price moves. Together, this news flow helps frame whether the latest uptick reflects a shift in sentiment or just short term noise.
- Right now, the company scores a full 6 out of 6 on our valuation checks. The rest of this article will walk through the standard valuation methods used to get there, before finishing with a more holistic way to think about RPM International's value.
Find out why RPM International's -6.8% return over the last year is lagging behind its peers.
Approach 1: RPM International Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model takes estimates of the cash a company could generate in the future, then discounts those amounts back to today using a required rate of return. The result is an estimate of what the stock might be worth based on its cash generation alone.
For RPM International, the model uses a 2 Stage Free Cash Flow to Equity approach. The latest twelve month Free Cash Flow stands at about $571.8 million, with analyst and extrapolated projections reaching around $1,080.8 million in 2035. Simply Wall St uses analyst estimates where available, then extends those forecasts out to 10 years using its own assumptions on growth.
Pulling those discounted cash flows together gives an estimated intrinsic value of about $150.25 per share, compared with a current share price around $105. On this basis, the DCF output implies the stock trades at roughly a 30.0% discount to that intrinsic value, which indicates that RPM International appears undervalued when viewed using this model alone.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests RPM International is undervalued by 30.0%. Track this in your watchlist or portfolio, or discover 47 more high quality undervalued stocks.
Approach 2: RPM International Price vs Earnings
For a profitable company like RPM International, the P/E ratio is a straightforward way to relate what you pay for each share to the earnings that support it. Investors typically accept a higher P/E when they expect stronger growth or see lower risk, while slower growth or higher risk usually justifies a lower, more cautious P/E.
RPM International currently trades on a P/E of about 20.2x. That sits below the Chemicals industry average of roughly 26.4x and well below the peer group average of about 47.1x. Simply Wall St also estimates a Fair Ratio for RPM International of around 20.8x. This is the P/E that might be expected given factors such as its earnings growth profile, margins, industry, market cap and specific risks.
This Fair Ratio can be more informative than a simple comparison with peers or the broad industry, because it aims to match the multiple to RPM International’s own fundamentals rather than those of potentially very different companies. With the current P/E of 20.2x sitting very close to the Fair Ratio of 20.8x, the stock looks broadly in line with what this approach would suggest.
Result: ABOUT RIGHT
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Upgrade Your Decision Making: Choose your RPM International Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced here as simple stories that you and other investors build around RPM International, linking your view of its future revenue, earnings and margins to a forecast and then to a fair value that you can compare with the current price.
On Simply Wall St's Community page, Narratives are presented as easy to use tools that sit on top of the same numbers discussed above, but let you anchor them to a clear thesis. For example, one Narrative might reflect a more optimistic view similar to the US$148.0 analyst target that assumes stronger execution on efficiency programs and growth initiatives. Another might mirror the more cautious US$115.0 target that focuses on regulatory pressure, input costs and execution risk. As new earnings reports or news arrive these Narratives refresh so you can see in one place whether your chosen fair value still supports holding, adding to, or trimming your RPM International position.
Do you think there's more to the story for RPM International? 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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