If you’ve been tracking Capgemini, you might be wondering where this French technology consulting powerhouse is headed or whether its current price makes for a smart entry point. After all, Capgemini’s stock has seen its fair share of ups and downs this year. The shares just closed at 124.25, up a tame 0.4% over the last week, but still down almost 2% in the past month. That is on top of a significant year-to-date decline of 20.7%, and if we rewind even further, the one-year drop sits deep at 32.4%. While such numbers may seem discouraging, it is worth pointing out that over the last five years, Capgemini has still delivered a positive return of 22.6%. That is nothing to brush off in a sector as dynamic as technology consulting.
Much of the recent turbulence can be traced to broad market volatility, shifts in sentiment across European tech stocks, and global economic headwinds that have weighed on growth expectations. Still, the long-term trends suggest the business model remains resilient, and investor risk perceptions can change quickly once the winds shift.
If you’re looking for a simple answer to whether Capgemini is undervalued or overpriced right now, the value score gives us a big clue: 5 out of 6. That means Capgemini comes out as undervalued in nearly every major check that analysts use. But what are those valuation checks, and how do they stack up for Capgemini right now? Let’s dive into each approach, and for those who want the smartest insight, stick around for an even better way to make sense of valuation at the end.
The Discounted Cash Flow (DCF) model estimates a company’s value by forecasting its future cash flows and then discounting these projections back to today’s value. This approach helps gauge what the business might be worth in comparison to its current stock price, providing analysis based on the company’s ability to generate cash over time.
For Capgemini, reported Free Cash Flow (FCF) over the last twelve months was €2.16 billion. Analysts estimate that annual FCF will gradually rise, with projections reaching €2.39 billion by 2029. Further growth estimates are extrapolated by Simply Wall St, indicating a modest future increase. All figures are presented in Euros, matching both reporting and share price currency.
Based on these cash flow projections, the DCF model estimates an intrinsic fair value for Capgemini at €187.47 per share. This suggests the stock is currently trading at a considerable discount of 33.7% compared to its calculated value.
This analysis indicates the stock is substantially undervalued at its current price, according to long-term cash flow assessments.
Our Discounted Cash Flow (DCF) analysis suggests Capgemini is undervalued by 33.7%. Track this in your watchlist or portfolio, or discover more undervalued stocks.
The Price-to-Earnings (PE) ratio is a popular tool for valuing profitable companies like Capgemini because it shows how much investors are willing to pay for each euro of earnings. A lower PE can signal a bargain, while a higher PE often reflects strong growth expectations or lower risk associated with a company.
Calculating what a “normal” or “fair” PE ratio should be always takes some nuance. Companies with higher expected profits, faster growth, or lower risk profiles typically deserve higher PEs than those facing headwinds or uncertainty. In other words, growth prospects and the market’s view of risk strongly influence where a stock’s multiple should land.
Capgemini currently trades at a PE ratio of 13.5x. That is noticeably below the IT industry average of 22.6x and beneath the peer average of 10.8x. On the surface, this looks inexpensive for a major player in technology consulting. However, comparisons to peers or the broader industry do not always tell the whole story, since they may differ in areas like market segment, geographic focus, and financial resilience.
This is where Simply Wall St’s proprietary “Fair Ratio” comes into play. The Fair PE Ratio, at 24.5x for Capgemini, factors in specifics such as earnings growth potential, profit margins, risk levels, industry context, and company size to produce a benchmark tailored for Capgemini’s profile. This approach delivers a more precise reading than simply stacking the company up against generic averages or competitors, as it reflects Capgemini’s unique characteristics and future prospects.
Given that Capgemini’s current PE of 13.5x is substantially below its calculated Fair Ratio of 24.5x, the stock appears significantly undervalued when using a more holistic, company-specific view.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. Narratives are straightforward, story-driven frameworks that let you explain the “why” behind the numbers. They provide a way to link your unique perspective on a company with realistic financial assumptions and a resulting fair value.
A Narrative starts with your own view of Capgemini’s future, such as anticipated revenue growth, changing profit margins, and the risks or opportunities that matter most. It then connects those forecasts to a fair value estimate for the stock. Once created, your Narrative lets you compare your fair value to the current market price, helping you spot if Capgemini aligns with your expectations or if it is time for a second look.
Narratives on Simply Wall St’s Community page are easy to build, accessible to everyone, and updated automatically as new information comes in. Your outlook stays relevant when news or earnings are released. This makes Narratives a dynamic, practical tool used by millions of investors to decide when to buy or sell, based on their evolving view.
For example, some Capgemini Narratives predict high AI-driven growth and see fair value at over €214 per share, while others expect slower earning recovery and set fair value around €134. This highlights how perspectives and investment decisions can vary depending on your story, not just the latest PE or DCF number.
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 CAP.enxtpa.
