Is MakeMyTrip (NasdaqGS:MMYT) Now Attractive After This Year’s Sharp Share Price Pullback?

• Wondering whether MakeMyTrip at US$44.93 is starting to look cheap, expensive, or fairly priced, especially after a rough patch for the stock.
• The share price is down 2.9% over the last week, 11.9% over the last month, and 45.1% year to date, even though the 3 year and 5 year returns stand at 69.2% and 73.7%.
• Recent attention on MakeMyTrip has focused on how the stock’s sharp pullback contrasts with its longer term returns. This has brought valuation firmly into the spotlight for many investors. This context matters, because it shapes whether the current price is seen as a reset in expectations or an opportunity after a strong multi year run.
• Despite the interest, MakeMyTrip currently scores 0 out of 6 on Simply Wall St’s valuation checks. It is worth looking at how different methods assess the stock today and then coming back to a broader way of thinking about valuation at the end of this article.

MakeMyTrip scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: MakeMyTrip Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a stock could be worth by projecting future cash flows and discounting them back to today’s value using a required return. It focuses on the cash the company is expected to generate for shareholders rather than just current earnings.

For MakeMyTrip, the latest twelve month Free Cash Flow is about US$208 million. Analysts and Simply Wall St’s 2 Stage Free Cash Flow to Equity model project cash flows up to 2035, with analyst inputs through 2028 and further years extrapolated. By 2035, the model uses an estimated Free Cash Flow of roughly US$495 million, all in US$ terms.

When those projected cash flows are discounted back, the DCF model arrives at an estimated intrinsic value of about US$42.11 per share. Compared with the recent share price of US$44.93, the model suggests MakeMyTrip is around 6.7% above this fair value estimate, so the stock screens as slightly overvalued, but not by a wide margin.

Result: ABOUT RIGHT

MakeMyTrip is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

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

Approach 2: MakeMyTrip Price vs Earnings

For profitable companies, the P/E ratio is a useful way to think about value because it links what you pay for each share to the earnings that share currently generates. Higher growth expectations and lower perceived risk usually justify a higher P/E ratio, while slower growth or higher risk typically go with a lower, more conservative P/E.

MakeMyTrip is trading on a P/E of 75.10x. That is higher than both the Hospitality industry average of 19.80x and the average of its peers at 27.61x. On the surface, this suggests investors are paying a premium compared with many other Hospitality stocks.

Simply Wall St’s Fair Ratio for MakeMyTrip is 47.84x. This Fair Ratio is a proprietary estimate of what a reasonable P/E could be after factoring in elements such as earnings growth, profit margins, the company’s industry, market capitalization and specific risks. Because it adjusts for these company level drivers, it can be more informative than a simple comparison with peers or industry averages alone. Comparing the Fair Ratio of 47.84x with the actual P/E of 75.10x indicates the stock currently screens as overvalued on this measure.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your MakeMyTrip Narrative

Earlier it was mentioned that there is an even better way to understand valuation, so this is where Narratives come in, giving you a clear story behind the numbers by linking your view on MakeMyTrip’s future revenue, earnings and margins to a specific fair value that you can compare with today’s price.

A Narrative on Simply Wall St’s Community page is your structured perspective on the company, where you connect what you think is happening in the business to a forecast and then to a fair value, instead of only looking at ratios like the current P/E of 75.10x.

Because Narratives are refreshed when new information such as earnings, news or updated analyst assumptions is added, they help you see whether your fair value still holds up and whether the stock looks closer to the more bullish US$117.0 view or the more cautious US$60.0 view at any point in time.

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