Zebra Technologies (ZBRA) Stock Looks Cheap On Cash Flow But Fair On Earnings
Zebra Technologies has delivered a share price that is still down sharply over five years, yet its Discounted Cash Flow (DCF) intrinsic value estimate points to meaningful upside from current levels, while market multiples look closer to fair.
- The stock has declined 51.3% over the past five years, which sets a cautious backdrop for any case that it is now undervalued.
- Fresh product launches in high-speed machine vision can support long term growth expectations, but the valuation still faces the risk that these newer offerings take longer than hoped to translate into durable cash flows.
- Across the broader checks, Zebra Technologies screens as cheap, with the company undervalued in 6 of 6 valuation tests, even though earnings based multiples suggest pricing that is about right.
The issue now is whether the discount implied by the DCF style intrinsic value estimate, at roughly 37.8%, offers a margin of safety that justifies the mixed recent share price record.
Find out why Zebra Technologies' -19.4% return over the last year is lagging behind its peers.
Is Zebra Technologies Still Cheap on Cash Flow?
The Discounted Cash Flow (DCF) model here uses projected free cash flows to estimate what Zebra Technologies might be worth today. On this basis, Zebra Technologies is valued using a 2 Stage Free Cash Flow to Equity approach that starts from latest twelve month free cash flow of about $830.1m and assumes growing cash flows over time rather than a sharp decline or one off spike. That stream of projected cash flows translates into an estimated intrinsic value of about $429.69 per share.
With the DCF indicating the stock trades at roughly a 37.8% discount to that intrinsic value, Zebra Technologies appears undervalued relative to the model output. Because Zebra has raised its full year sales growth outlook, the gap between the cash flow based estimate and the current share price suggests the market may not be fully reflecting those higher revenue expectations in the valuation.
Overall, the Discounted Cash Flow workup suggests Zebra Technologies stock may be undervalued at current prices.
Our Discounted Cash Flow (DCF) analysis suggests Zebra Technologies is undervalued by 37.8%. Track this in your watchlist or portfolio, or discover 47 more high quality undervalued stocks.
Is Zebra Technologies Fairly Priced on Earnings?
The P/E multiple is a useful way to look at Zebra Technologies because earnings remain a key focus for many investors in hardware and automation stocks. Zebra Technologies currently trades on a P/E of about 30.5x, which sits in line with the Electronic industry average of roughly 30.5x and below the peer group average of around 66.8x.
The fair P/E ratio, which blends factors such as Zebra Technologies' sector, profitability profile and risk, is around 33.2x. That is only slightly above the current 30.5x level, so the stock does not screen as obviously cheap or stretched on earnings. This suggests a market view that already incorporates the available information on Zebra Technologies without assigning a steep premium or a clear discount.
On the P/E multiple, Zebra Technologies stock appears roughly fairly valued at current prices.
See what the numbers say about this price — find out in our valuation breakdown.
The Zebra Technologies Narrative: What Would Justify Today's Price?
Simply Wall St Narratives for Zebra Technologies sit between the DCF output and the current P/E picture by explaining what kind of future for Zebra Technologies' growth, margins and earnings would need to occur for the stock to be worth materially more or less than today's price. These narratives are available on the company's Community page. Where a single ratio or valuation model gives one headline figure, these scenarios set out the underlying assumptions so you can monitor whether reality is tracking the story that number relies on.
One of the top community narratives on Zebra Technologies: 6% undervalued
"U.S. import tariffs and geopolitical uncertainties threaten gross profits and revenue predictability by increasing costs and compressing margins."
Read one of the top narratives on Zebra Technologies
Do you think there's more to the story for Zebra Technologies? Head over to our Community to see what others are saying!
The Bottom Line
For Zebra Technologies, the Discounted Cash Flow (DCF) work points to intrinsic value above the current share price, while the P/E view sits closer to about right, so the stock does not screen as a simple mispricing. Broader valuation checks look supportive, but the key uncertainty is whether newer offerings, such as high speed machine vision, translate into steady cash flows soon enough to justify the intrinsic value estimate. The central question for investors is whether the current discount reflects temporary caution or a fair response to execution risk around growth and margins from here.
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.
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