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Growth expectations and company risk both influence what investors consider a fair or normal P/S ratio. Businesses with stronger growth prospects or lower risk profiles often justify higher P/S multiples. Slower growers or riskier firms typically trade at lower multiples.

Currently, Primo Brands trades at a P/S ratio of 0.89x. This is significantly lower than both the beverage industry average of 2.27x and the peer group’s average of 3.66x.

Simply Wall St’s proprietary “Fair Ratio” goes beyond simple averages and provides a tailored benchmark based on factors such as Primo Brands’ growth outlook, risk profile, profit margin, industry, and market capitalization. For Primo Brands, the Fair Ratio is calculated at 1.05x. This is a more holistic, company-specific measure and can offer a more relevant benchmark than broad industry or peer comparisons since it incorporates the nuances that matter most to investors.

With Primo Brands’ actual P/S ratio at 0.89x and the Fair Ratio at 1.05x, the difference suggests the stock is somewhat undervalued according to this approach.

Result: UNDERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1434 companies where insiders are betting big on explosive growth.

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is simply your story behind the numbers. It is your personal perspective on where a company is headed, based on your assumptions about its future revenue, earnings, and margins. Narratives connect what you believe about a business with financial forecasts and translate your story into an estimated fair value for the stock.

On Simply Wall St’s Community page, investors can easily build and share Narratives in just a few minutes. This is an accessible, dynamic tool trusted by millions. Comparing your Narrative’s fair value to the current share price can help you decide whether it is time to buy or sell, bringing your conviction to real investment actions.

Narratives are continuously updated as news or fresh earnings reports emerge, keeping your view aligned with the latest information. For example, one investor might see Primo Brands as worth $45 per share due to caution about growth, while another’s Narrative values it at $75 based on optimism about new partnerships. Narratives let you bring your own outlook into the investing process and join the community conversation with confidence.

Do you think there’s more to the story for Primo Brands? 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 PRMB.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

• Wondering whether Nutanix’s current share price is a bargain or a warning sign? If you’re curious about the true value behind the ticker, you’re not alone.

• The stock recently tumbled, dropping 20% over the last week and over 30% in the past month. This could signal growing volatility or shifting market sentiment.

• Analysts and investors have been buzzing after Nutanix confirmed new technology partnerships and announced an expanded lineup of cloud solutions. These developments help explain some of the intense recent price movements. Market watchers are closely following how these changes may unlock further growth or introduce fresh risks.

• Our initial pass at valuation checks finds Nutanix scoring 3 out of 6. This suggests the company is undervalued by three measures but is not a simple story. Next, we’ll dig into how different valuation approaches view Nutanix, and why the best judgment might come from looking beyond just numbers.

Find out why Nutanix’s -27.5% return over the last year is lagging behind its peers.

A Discounted Cash Flow (DCF) model estimates a company’s true value by projecting its future free cash flows and discounting them back to today’s dollars. This approach helps investors understand what a business is fundamentally worth by focusing on its ability to generate cash over time.

For Nutanix, the latest report puts annual Free Cash Flow at $773.8 Million. Analysts forecast a steady climb in the coming years, with projected Free Cash Flow reaching $1.05 Billion by 2028. While only the first five years of estimates come directly from analysts, further projections through 2035 are extrapolated. This provides a longer-term perspective on the company’s earning power.

Based on this model, Nutanix’s intrinsic value comes out to $76.06 per share, which means the current share price is trading at a 36.4% discount. This suggests the market may be underestimating the company’s growth potential or overreacting to recent volatility.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Nutanix is undervalued by 36.4%. Track this in your watchlist or portfolio, or discover 926 more undervalued stocks based on cash flows.

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

For companies that are now profitable, the Price-to-Earnings (PE) ratio is one of the most fitting ways to compare valuation. This metric reveals how much investors are willing to pay for a dollar of current earnings, making it especially relevant for mature businesses generating consistent profits.

However, what counts as a “normal” or “fair” PE ratio varies widely. Factors such as future earnings growth, business risk, and the strength of a company’s profit margins all influence where this number should fall. Higher-growth and lower-risk companies often command higher PE multiples, while companies facing more uncertainty trade at lower ratios.

Nutanix’s current PE ratio stands at 59.35x, notably above the Software industry average of 29.19x and higher than its peer group, which sits at 37.96x. This might initially signal that the market expects Nutanix to continue delivering exceptional growth or that it is priced at a premium.

To help cut through the noise, Simply Wall St has developed the “Fair Ratio,” a proprietary benchmark for the PE multiple that weighs Nutanix’s individual characteristics including its growth outlook, profitability, risk profile, industry trends, and market capitalization. Unlike a broad comparison to the average peer or sector, the Fair Ratio offers a tailored reference point and reflects Nutanix’s unique position.

For Nutanix, the Fair Ratio is estimated at 47.71x. Since the company’s actual PE ratio is considerably higher, the stock appears to be trading above what its fundamentals might justify, even after accounting for its favorable characteristics.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1434 companies where insiders are betting big on explosive growth.

Earlier we mentioned that there’s an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your personal investment “story” for a company—your view of its future, paired with the numbers you believe matter most, such as fair value, future revenue, earnings, and profit margins. Narratives connect what’s happening at Nutanix to a real financial forecast, providing a clear link between events, price targets, and the company’s long-term outlook.

On Simply Wall St’s Community page, Narratives are an easy-to-use tool trusted by millions of investors to express their outlook, compare it to others, and make smarter decisions. They help you decide when to buy or sell by matching your estimated fair value (and what you see as likely business outcomes) against today’s share price, without the need for complicated models or spreadsheets.

Because Narratives update dynamically with every new earnings report, news headline, or partnership announcement, your perspective always stays relevant. For example, some investors currently believe Nutanix deserves a price as high as $95 based on dominant AI-driven growth and expanding market share, while the most skeptical peg fair value closer to $71 due to margin pressure and competitive headwinds. Your Narrative can reflect your own logic and help you act confidently, even when the market is divided.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com