RELX (LSE:REL) Stock Looks Cheap Relative To Fair Value
RELX has had a rough patch over the past year, yet the current share price still screens as cheap on both cash flow estimates and traditional valuation checks. That split between a weak recent share performance and an intrinsic value estimate that points to a discount is what investors now need to weigh.
- Over the past 12 months, RELX shares have fallen 26.1%, which puts recent sentiment and price momentum firmly on the back foot.
- Reliable recurring revenue and cash generation from RELX's information and analytics businesses can support the case that the current market price understates the long term cash flow potential, although any slowdown in customer spending or contract renewals may pressure that view.
- The broader valuation workup is a mixed picture rather than a clear bargain or a clear overvaluation, with RELX scoring 4 out of 6 checks screening as undervalued.
The issue now is whether the current discount implied by the intrinsic value estimate and market multiples offers enough compensation for the recent share price weakness in RELX.
Spot undervalued peers to RELX by scanning our hand-picked list of 9 high quality undervalued stocks, which also combine solid cash flows with balance sheet strength.Is RELX a Bargain on Cash Flow?
The Discounted Cash Flow model looks at the cash RELX can generate for shareholders and then discounts those future sums back into today’s money. RELX currently produces last twelve month free cash flow of about £2.4b, which is treated in the model as continuing to grow from an already sizeable base rather than swinging from loss to profit.
On that set of cash flow projections, the model arrives at an estimated intrinsic value of about £38.58 per share. When that figure is compared with the current market price, the DCF output indicates that RELX trades at a 35.8% discount and that the share price does not fully reflect the projected cash generation.
Taken together, the DCF work implies the RELX stock currently screens as undervalued.
Our Discounted Cash Flow (DCF) analysis suggests RELX is undervalued by 35.8%. Track this in your watchlist or portfolio, or discover 9 more high quality undervalued stocks.
Does RELX Look Undervalued on Earnings?
P/E works well for RELX because profit is a key focus for investors in information and analytics businesses. On this measure, the stock trades on about 19.1x earnings, which is slightly above the wider Professional Services industry average of 18.3x, yet sits below the peer group average of 22.0x.
The modelled fair P/E ratio for RELX is 32.2x based on its profile relative to other listed companies in the sector. That is a large gap to the current 19.1x multiple, and it suggests the market price does not fully reflect the earnings power implied by those inputs.
On the P/E multiple, RELX stock appears undervalued compared with the level implied by its earnings profile and benchmark peers.
See what the numbers say about this price — find out in our valuation breakdown.
The RELX Narrative: What Would Justify Today's Price?
Narratives for RELX pick up where the valuation work leaves off and explain which paths for growth, margins, and earnings would need to occur for the current share price to appear high or low. Where a single ratio or cash flow model gives you one number to compare, these scenarios unpack the future that number relies on, so you can monitor whether RELX's actual progress matches it on Simply Wall St's Community page.
Community views on RELX could hardly be further apart, with one camp focused on the depth of its data assets and the other on what AI might do to its pricing power.
Bull case: 27% undervalued
"Momentum in adoption of AI-enhanced platforms (Lexis+ AI, Protégé, ScienceDirect AI, etc.) across legal and academic customers is driving double-digit spend uplifts, with management noting strong new sales, increased renewal rates, and an accelerating shift of the revenue base to AI-integrated offerings, which is fueling both top-line growth and higher net margins…"
Read the full Bull Case to see why RELX could be undervalued
Bear case: 12% overvalued
"However, the risk should be acknowledged that if new AI tools provide unprecedented efficiency to professionals with adequate output, even proprietary data might not be enough for RELX to retain customers…"
Read the full Bear Case to see why RELX could be overvalued
Do you think there's more to the story for RELX? Head over to our Community to see what others are saying!
The Bottom Line
RELX screens as undervalued on both the Discounted Cash Flow (DCF) intrinsic value estimate and its earnings multiple, which point in the same direction even after a tough year for holders. That combination hints at a discount that only really closes if the market regains confidence in the durability of RELX's cash generation and earnings profile. The real hinge from here is whether AI driven products deepen customer relationships and support pricing, or whether new tools erode that edge and leave the current discount looking more like a value trap than a mispricing.
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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