Is Rockwool Fairly Priced After 3.6% Share Price Rise and Sustainability Push?

• Ever wonder if Rockwool is trading at a bargain or charging a premium? You are not alone. Diving into the valuation story could make all the difference for savvy investors.

• After some swings, Rockwool’s share price has ticked up 3.6% over the past week, even though it remains down 14.5% year-to-date and 13.6% over the last 12 months.

• Much of this recent volatility lines up with headlines highlighting Rockwool’s ambitious plans to expand sustainable insulation offerings and ongoing sector shifts tied to green building regulations. Analysts have also been abuzz about increased investments in innovation, signaling both opportunities and evolving risks for shareholders.

• When it comes to valuation, Rockwool scores a solid 5 out of 6 on our undervaluation checklist, suggesting it passes most of the key value tests. In the next sections, we are going to dig deeper into the methods behind these numbers. Stick around, because we will also show you a smarter way to size up Rockwool’s real value.

Find out why Rockwool’s -13.6% return over the last year is lagging behind its peers.

The Discounted Cash Flow (DCF) valuation method estimates a company’s true worth by extrapolating its future cash flows and discounting them back to today in order to account for risk and the time value of money. This approach offers a clearer gauge of intrinsic value compared to volatile market swings.

For Rockwool, the most recent twelve months’ Free Cash Flow stands at €383.88 million. Analyst forecasts extend for the next five years, projecting Free Cash Flow to reach around €287 million by the end of 2029. Beyond that horizon, projections are derived using long-term growth assumptions, with free cash flow expected to gradually increase through 2035. All estimates are provided in euros, as Rockwool reports in this currency.

The DCF model synthesizes these projections and arrives at a fair value of €219.12 per share. At the time of this analysis, Rockwool’s share price reflects a 0.8% discount to this theoretical fair value. This suggests the stock is trading almost in line with its underlying business fundamentals.

Result: ABOUT RIGHT

Rockwool 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 Rockwool.

The Price-to-Earnings (PE) ratio is a favored metric for valuing profitable companies like Rockwool, as it provides a direct comparison between a company’s share price and its earnings. Investors use the PE ratio to gauge how much they are paying for each unit of earnings. This makes it especially relevant for established businesses with reliable profit streams.

A “normal” or “fair” PE ratio can vary significantly depending on a company’s growth prospects and risk profile. Companies with higher expected growth or lower risk often warrant higher PE multiples, while slower-growth or riskier companies typically command lower values.

Currently, Rockwool trades at a PE ratio of 12.2x. This is notably below the Building industry average of 19.1x and its peer group average of 19.9x. This suggests that the market is pricing Rockwool more conservatively than many of its counterparts. Instead of just comparing against these benchmarks, Simply Wall St uses a proprietary “Fair Ratio,” which reflects what a reasonable PE would be by taking into account factors like Rockwool’s earnings growth potential, profit margins, industry dynamics, market cap, and company-specific risks. For Rockwool, the Fair Ratio is calculated at 14.6x.

Unlike simple peer or sector comparisons, the Fair Ratio offers a more tailored view by considering the full financial picture rather than just superficial market links. This results in a much more relevant benchmark for fair valuation.

With Rockwool trading at 12.2x compared to a Fair Ratio of 14.6x, the stock appears slightly undervalued, but the gap is modest.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1438 companies where insiders are betting big on explosive growth.

Earlier, we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives. A Narrative is your story about a company; it is how you connect your own perspective to Rockwool’s actual numbers, such as your fair value estimate and expectations for future growth and profitability.

With Narratives, you tie together the company’s underlying story, a financial forecast based on your assumptions, and a calculation of fair value, all in one place. Narratives make investment decisions more dynamic and personal by allowing you to capture not just what has happened, but what you believe will drive Rockwool’s future results.

This tool is available directly in the Community page on Simply Wall St, where millions of investors post and update their own Narratives. It is an easy, accessible way to track your viewpoint and compare it to others as new earnings, news, or market conditions come in.

By using Narratives, you can see instantly whether your fair value, based on your thesis, is above or below the current market price, helping you decide whether it’s time to buy, sell, or hold. For example, some investors are optimistic, projecting a price target for Rockwool as high as DKK360.00, while others are more cautious, seeing fair value closer to DKK249.89. Your Narrative can reflect whichever perspective you believe is most likely.

Do you think there’s more to the story for Rockwool? 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.

Companies discussed in this article include ROCK-B.CO.

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