Goodyear Tire & Rubber has seen its share price weaken sharply in recent years, which puts fresh focus on whether the current US$4.68 level is still in line with the sales that the business is generating. With the stock under pressure and the company reshaping its footprint, the open question is how much revenue power the market is really paying for.
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Over the past 5 years the stock has fallen 75.2%, which raises the issue of whether the market is now attaching a very different value to each dollar of Goodyear's sales.
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Recent plant closures, portfolio exits and cost programs suggest management is trying to protect margins and cash generation from its existing revenue base, which can influence how investors think about the value of its current and future sales.
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Your read on Goodyear Tire & Rubber is one view; the desks covering it have another. See what analysts think Goodyear Tire & Rubber's shares could be worth .
The issue now is whether Goodyear's current share price is justified by the scale and quality of its sales.
If you are weighing Goodyear Tire & Rubber after this sales focused reset, it can help to compare it with other businesses screened for 28 high quality undervalued stocks .
Is Goodyear Tire & Rubber Still Cheap on Sales?
P/S suits Goodyear Tire & Rubber because investors are currently paying mainly for its sales base while free cash flow and earnings stay under pressure.
On this lens, the stock trades at a P/S ratio of 0.1x, which is far below the Auto Components industry average of 0.5x and also below the 0.4x level seen across peers. Based on a more tailored fair multiple that factors in Goodyear's own scale, margins and risk profile, the current P/S sits below where that model would usually place the shares. This points to the stock screening as undervalued on revenue. Because the recent Fayetteville plant closure is aimed at supporting profitability on a smaller top line, this gap suggests the market is giving relatively little credit for the sales that remain in the business. Explore the numbers behind Goodyear Tire & Rubber's P/S valuation .
The Goodyear Tire & Rubber Narrative: What Would Justify Today's Price?
Simply Wall St Narratives for Goodyear Tire & Rubber pick up where the valuation puzzle leaves off by spelling out which combinations of future growth, margins and earnings would need to occur for the shares to be worth materially more or less than today's price on the Community page. Each narrative ties a fair value to a clear storyline about Goodyear Tire & Rubber's possible catalysts and risks, so you can watch over time which version of events appears to be unfolding.
One of the top community narratives on Goodyear Tire & Rubber: 55% undervalued
"The same debt that makes GT dangerous also makes the common move very quickly if the operating business improves..."
Discover why this Narrative puts Goodyear Tire & Rubber at 55% undervalued .
Before you make a call on Goodyear Tire & Rubber
There is one more piece to weigh with Goodyear Tire & Rubber, since the research checks have highlighted specific areas of concern that could matter as much as any valuation metric. Take a closer look at 1 warning sign before settling on a valuation.
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 GT .
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