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If you have been wondering whether Austal is still good value after its huge run up, you are not alone. This article is going to dig into whether the current price still stacks up.
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The share price has pulled back around 4.4% over the last week and 7.2% over the past month, but that is after a powerful rally that has the stock up about 101% year to date and roughly 122.5% over the last year.
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Recent headlines have centred on Austal's growing defence and shipbuilding footprint, including new contract wins and ongoing naval programs that have sharpened investor focus on the company's long term order book. At the same time, regulatory and geopolitical scrutiny around defence spending has added an extra layer of both opportunity and perceived risk to the story.
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Right now, Austal scores a 5/6 valuation check. This means it screens as undervalued on most of our standard metrics. We will unpack how each approach, from cash flows to multiples, lines up, before finishing with a more nuanced way to think about valuation that goes beyond the usual models.
Find out why Austal's 122.5% return over the last year is lagging behind its peers.
Approach 1: Austal Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model estimates what a company is worth by projecting the cash it can generate in the future and then discounting those amounts back to today, to reflect risk and the time value of money.
For Austal, the model starts with last twelve month Free Cash Flow of about A$259 million and uses analyst forecasts out to 2030, with further years extrapolated by Simply Wall St. Those projections see Free Cash Flow dipping in 2026, then recovering to around A$333 million by 2030 and continuing to climb thereafter. When all those future A$ cash flows are discounted back to today using a 2 Stage Free Cash Flow to Equity approach, the implied intrinsic value is approximately A$20.22 per share.
This DCF estimate suggests Austal is trading at around a 69.2% discount to its calculated fair value, which indicates the market is pricing in much weaker long term cash generation than this model assumes.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Austal is undervalued by 69.2%. Track this in your watchlist or portfolio , or discover 907 more undervalued stocks based on cash flows .
Approach 2: Austal Price vs Earnings
For profitable companies like Austal, the Price to Earnings, or PE, ratio is a straightforward way to gauge how much investors are willing to pay today for each dollar of current earnings. It captures both what the business is earning now and what the market expects those earnings to do in the future.
In general, faster growing and lower risk companies can justify higher PE ratios, while slower growth or higher uncertainty usually calls for a lower, more conservative multiple. Austal currently trades on a PE of about 29.2x. That sits below the broader Aerospace and Defense industry average of roughly 46.7x and also below the peer group average of around 37.8x, suggesting the market is pricing Austal more cautiously than many of its listed counterparts.
Simply Wall St's Fair Ratio framework goes a step further by asking what PE Austal should trade on given its specific earnings growth outlook, margins, size, industry and risk profile. For Austal, this Fair Ratio is estimated at about 27.9x, only slightly below the current 29.2x. Because this approach is tailored to the company rather than a broad peer set, it offers a more precise yardstick, and on that basis Austal screens as only modestly expensive rather than stretched.
Result: OVERVALUED
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1448 companies where insiders are betting big on explosive growth .
Upgrade Your Decision Making: Choose your Austal Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of Austal's story to a concrete financial forecast and an explicit fair value. A Narrative on Simply Wall St is your own storyline for a company, where you spell out what you expect for future revenue, earnings and margins, and the platform turns that story into forecasts and a fair value that you can easily compare with today's share price to help inform a decision on whether to buy, hold or sell. Narratives live inside the Community page that millions of investors use, are easy to set up or copy from others, and they update dynamically as new news, guidance or earnings reports come in so your numbers stay aligned with reality. With Austal, for example, one investor might build a bullish Narrative around sustained double digit revenue growth, rising margins and a fair value closer to A$8.00 per share, while a more cautious investor could focus on contract risk and cyclicality and land on something nearer A$5.58, clearly showing how different stories can lead to different fair values and decisions.
Do you think there's more to the story for Austal? 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 ASB.AX .
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