Is Amcor (AMCR) Now Attractively Priced After Recent Share Price Pullback

• Investors may be wondering whether Amcor's current share price reflects its true worth, or if the market is missing something important about this packaging company.
• Over the last week the stock is up 4.5%, although the return over 30 days is an 8.0% decline and the 1-year return sits at a 5.4% loss, which may have shifted how some investors view its risk and potential.
• These mixed returns have kept attention on how the market is reacting to Amcor and how sentiment can change quickly when conditions or expectations move. Recent coverage has focused on the share price performance itself, which makes it a good moment to step back and focus on what investors are actually paying for in the business.
• Amcor currently has a valuation score of 3 out of 6. This article will walk through what that means using different valuation methods and then conclude with a way to look at value that goes beyond a simple score.

Find out why Amcor's -5.4% return over the last year is lagging behind its peers.

Approach 1: Amcor Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model looks at the cash Amcor is expected to generate in the future and discounts those cash flows back to today, to estimate what the business might be worth right now.

Amcor's latest twelve month free cash flow is about $850.0 million. Using a 2 Stage Free Cash Flow to Equity model, analysts and extrapolated estimates project free cash flow reaching around $1.9 billion by 2029, with further projections out to 2035 ranging between about $1.8 billion and $1.9 billion. All of these future cash flows are discounted back using the DCF approach described as cash flow projections.

On this basis, the DCF model arrives at an estimated intrinsic value of $71.07 per share. Compared with the current share price, this implies the stock is 44.0% undervalued, suggesting the market price is meaningfully below this cash flow based estimate.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Amcor is undervalued by 44.0%. Track this in your watchlist or portfolio, or discover 62 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 Amcor.

Approach 2: Amcor Price vs Earnings

For profitable companies, the P/E ratio is a common way to think about value because it ties the share price directly to the earnings that each share represents. It effectively tells you how many dollars you are paying for one dollar of current earnings.

What counts as a “normal” P/E often reflects how the market views a company’s growth outlook and risk. Higher expected growth or lower perceived risk can justify a higher multiple, while lower growth or higher risk can lead to a lower one.

Amcor currently trades on a P/E of 30.86x. That is above the Packaging industry average of 15.55x and also above the average of its broader peer group at 21.66x. Simply Wall St’s Fair Ratio for Amcor is 26.33x, which is a proprietary estimate of the P/E that might be reasonable given factors such as earnings growth, industry, profit margins, market cap and company specific risks.

The Fair Ratio aims to be more tailored than a simple comparison with peers or industry averages because it adjusts for differences in growth, risk profile, profitability, sector and size. Against this Fair Ratio of 26.33x, Amcor’s actual P/E of 30.86x sits higher, indicating the shares may be pricing in more optimism than this framework suggests.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Amcor Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St’s Community page let you attach a clear story about Amcor to the numbers by linking your view on its merger integration, margins, leverage and end markets to a financial forecast and Fair Value. You can then compare that Fair Value with the current price and automatically update your view as new earnings or news arrive. Some investors may build a more optimistic Amcor Narrative around higher earnings and a Fair Value closer to about $52.54 or even $13.80 per share. Others may lean on a more cautious Narrative anchored nearer $9.00. This gives you a simple framework to see where your own assumptions sit across that range.

For Amcor however we will make it really easy for you with previews of two leading Amcor Narratives:

🐂 Amcor Bull Case

Fair value in this bullish narrative: US$52.54 per share.

Implied discount to this fair value versus the last close of US$39.81: about 24% undervalued.

Revenue growth assumption: 7.0% a year.

• Views the Berry Global integration as a key driver of US$650 million in targeted cost synergies by fiscal 2028, with a focus on procurement, efficiency and portfolio clean up.
• Assumes Amcor gains from greater exposure to Asia Pacific and Latin America and to health and nutrition packaging, supported by sustainability focused products.
• Builds a case around analysts reaching earnings of US$1.7b by 2029 and using a P/E of 22.5x to support a consensus fair value of US$52.54, while highlighting execution, leverage and portfolio review risks.

🐻 Amcor Bear Case

Fair value in this cautious narrative: US$5.00 per share.

Implied premium to this fair value versus the last close of US$39.81: about 697% overvalued, which is a very large gap.

Revenue growth reference rate: 4.19% a year.

• Flags high leverage, a debt to equity ratio of 1.27 and net debt to EBITDA of 3.4x, along with a current ratio of 1.20 that leaves limited headroom.
• Highlights weaker current profitability, with recent return on equity at 4.2% and operating margin around 9.8%, while also pointing to a P/E of 27.53x on GAAP earnings.
• Combines multiple valuation cross checks, including a DCF value of about US$4.85 per share and P/E and P/B based estimates, to argue that the share price screens expensive on cash flow and relies on successful integration to support today’s level.

Seen together, these Narratives frame the current debate around Amcor, from a more optimistic view built around synergy delivery and portfolio shifts to a more cautious view that focuses on leverage, current returns and valuation. To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Amcor on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

Do you think there's more to the story for Amcor? 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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