Assessing Amer Sports After 52.9% Stock Surge and Global Expansion Headlines
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Curious if Amer Sports is a bargain, priced to perfection, or somewhere in between? You’re definitely not alone. Figuring out whether the current price makes sense is what every investor wants to know.
Amer Sports’ stock has had its share of excitement, climbing 52.9% over the past year but pulling back by 13.1% in the last month and 7.1% just this past week, which may have shaken up risk perceptions or created new opportunities.
These moves come on the heels of recent headlines highlighting the company’s global expansion strategy and product launches, fueling optimism about its growth runway. There has also been attention on changing competitive dynamics in the sportswear market, adding an extra layer of intrigue for long-term investors.
When it comes to its current valuation, Amer Sports scores a 3 out of 6 based on standard valuation checks. This is decent but not outstanding. We’ll dig into what this score really means across different valuation frameworks, and later, we will reveal a smarter, more holistic way to look at value.
The Discounted Cash Flow (DCF) model estimates what a business is worth by projecting its future cash flows and discounting them back to today. This provides an intrinsic value grounded in the company’s potential to generate cash.
For Amer Sports, the DCF calculation uses a two-stage Free Cash Flow to Equity method. The company’s latest reported Free Cash Flow stands at $225.1 Million. Over the next decade, analysts forecast continued rapid growth, with Free Cash Flow expected to reach $983.5 Million by 2029. It is worth noting that only the next five years have analyst-backed estimates. Simply Wall St then extrapolates further growth, extending out to 2035 with projected Free Cash Flow rising as high as $1.9 Billion.
This approach produces an intrinsic value of $40.72 per share. With Amer Sports currently trading at a 27.1% discount to this estimate, the DCF suggests the stock may be notably undervalued by the market right now.
The Price-to-Earnings (PE) ratio is a widely regarded metric for valuing profitable companies, as it compares a company’s current share price to its earnings per share. Typically, higher expected growth and lower risk allow for a higher “fair” PE multiple. In contrast, slower-growing or riskier companies command lower ratios.
Amer Sports currently trades at a PE ratio of 73.5x. For context, the average PE in the luxury industry is 18.5x, and the average among Amer Sports’ peers is 30.9x. The company’s ratio is therefore well above both industry and peer group benchmarks, which often happens when investors expect significant earnings growth or a competitive edge.
However, Simply Wall St introduces the concept of a “Fair Ratio.” In this case, the Fair Ratio is calculated at 26.9x for Amer Sports. Unlike straightforward comparisons to industry averages or peers, this proprietary metric takes into account a range of elements including Amer Sports’ specific growth outlook, risk profile, profit margins, industry dynamics, and size. Because it is tailored, the Fair Ratio is a more nuanced benchmark for value.
Comparing the current PE multiple (73.5x) to the company’s Fair Ratio (26.9x), Amer Sports appears significantly overvalued on this metric.
Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your own story behind the numbers, where you set your expectations about Amer Sports’ future revenue, earnings, and margins, then see how that drives a unique “fair value.”
Instead of just comparing static ratios or following consensus, Narratives connect everything you know (and believe) about a company to a personalized forecast, helping you see exactly how your view translates into a valuation. Narratives are available for everyone on the Simply Wall St Community page, where millions of investors use them to test ideas and compare perspectives.
The real power of Narratives is that they help you make informed buy or sell decisions by directly comparing your Fair Value with the company’s current Price. As new news, earnings, or developments come in, your Narrative updates automatically and keeps your view current and informed without extra effort.
For example, one investor might create a bullish Narrative for Amer Sports, believing rapid Asia-Pacific expansion will drive earnings to $974 million and a Fair Value of $52 per share. Another, more cautious, user forecasts $661 million in earnings and a Fair Value of only $34. Narratives put the focus on your expectations and help you decide with more clarity.
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.
Companies discussed in this article include AS.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
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