Does Goodyear (GT) Offer Value After Prolonged Share Price Weakness?

• Wondering whether Goodyear Tire & Rubber at around US$6.35 is a potential bargain or a value trap? This breakdown will help you frame that question clearly before you commit any capital.
• The stock has recently been under pressure, with a 5.8% decline over the past week, a 29.0% decline over the past month, and year to date returns of 28.8% decline, extending to a 32.9% decline over the past year and a 62.6% decline over five years.
• These returns sit against a backdrop of ongoing headlines around the Auto Components space and investor sentiment toward companies exposed to cyclicality, cost pressures, and changing demand patterns. While this article does not focus on individual news stories, it sets those moves in context by looking at what the current price may or may not reflect about the business.
• Goodyear Tire & Rubber currently holds a valuation score of 5 out of 6. The next sections will unpack how different valuation methods arrive at that result and point to a further framework at the end that can help you interpret those numbers in a more complete way.

Find out why Goodyear Tire & Rubber's -32.9% return over the last year is lagging behind its peers.

Approach 1: Goodyear Tire & Rubber Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes estimates of the cash a company could generate in the future and discounts those figures back into today’s dollars, aiming to show what the business might be worth based on those cash flows.

For Goodyear Tire & Rubber, the latest twelve month free cash flow stands at a loss of $182.8 million. Analyst forecasts and extrapolated estimates suggest free cash flow of $92.1 million in 2026, $181.1 million in 2027 and $200.4 million in 2028. Simply Wall St then extends these projections out to 2035 using a 2 Stage Free Cash Flow to Equity model, with later years based on estimated growth rates rather than direct analyst inputs.

When all those projected cash flows are discounted back to today, the model arrives at an estimated intrinsic value of about $7.64 per share. Against a recent share price around $6.35, this implies the stock screens as roughly 16.9% undervalued on this DCF view.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Goodyear Tire & Rubber is undervalued by 16.9%. Track this in your watchlist or portfolio, or discover 55 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Goodyear Tire & Rubber.

Approach 2: Goodyear Tire & Rubber Price vs Sales

For companies where earnings are weak or volatile, the P/S ratio can be a useful way to compare what investors are paying for each dollar of revenue, rather than each dollar of profit. It is often used alongside other metrics, with growth expectations and risk helping to explain why some businesses trade on higher or lower multiples than others.

Goodyear Tire & Rubber currently trades on a P/S ratio of 0.10x. This sits below the Auto Components industry average P/S of 0.71x and below a peer group average of 8.33x. Simply Wall St also calculates a proprietary “Fair Ratio” for the P/S multiple, which in this case is 0.49x. This Fair Ratio reflects factors such as the company’s growth profile, profit margins, industry, market cap and risk characteristics. Because it is tailored to the company, it can be more informative than a simple comparison with broad industry or peer averages.

Comparing the current P/S of 0.10x with the Fair Ratio of 0.49x suggests the shares are trading below the level implied by those fundamentals.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Goodyear Tire & Rubber Narrative

Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced here as simple stories you choose about Goodyear Tire & Rubber that connect your view of its future revenue, earnings and margins to a financial forecast and then to a fair value that you can compare with the current share price.

On Simply Wall St's Community page, Narratives are presented as an easy tool used by millions of investors. There you can see different fair values for Goodyear Tire & Rubber, such as around US$7.30 at the bearish end and about US$14.63 at the bullish end, each tied to a clear set of assumptions about revenue trends, future P/E multiples and profit margins.

By picking the Narrative that fits your view, you effectively choose the story behind the numbers. Because these Narratives refresh when new information like earnings or news is added, they can help you decide whether the current price looks attractive or stretched relative to the fair value implied by your chosen story.

Do you think there's more to the story for Goodyear Tire & Rubber? 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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