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Authors
Advisor(s)
Abstract(s)
The primary objective of this equity research project is to estimate the fair
value of Compagnie Générale des Établissements Michelin SCA (Michelin)
shares as of December 31, 2024, and provide an informed recommendation. The
analysis focuses on the global tyre industry, Michelin’s market position, and its
financial performance, considering the company’s response to the growing
electric vehicle (EV) market and sustainability trends.
To value Michelin’s shares, two methodologies were used: Discounted
Cash Flow (DCF) with the Free Cash Flow to Firm (FCFF) approach, and
multiples valuation using industry ratios. The FCFF method estimates Michelin's
intrinsic value based on its cash generation ability, while the multiples approach
(EV/EBITDA and P/E ratios) provides a market comparison view.
The DCF model produced a target price of €38,63, while the multiples
valuation suggested a range between €36,56 and €42,43. These values indicate
Michelin’s stock is slightly undervalued. The valuation was supported by an
industry and macroeconomic analysis, considering the company’s historical
performance, with the DCF model offering a long-term perspective and the
multiples approach reflecting market conditions.
A scenario analysis using the variables sales growth and terminal growth
rate (TGR) was conducted, showing the stock’s value remains stable, with
modest upside potential depending on future assumptions.
Additionally, the project underscores strategic considerations for
Michelin’s management, including adapting to electric vehicle trends through
specialized tyre development and advancing sustainability goals by incorporating
renewable materials and eco-friendly processes.
Based on the results, the recommendation is to buy Michelin shares, as
the current market price is below the estimated fair value, indicating modest
upside potential.
Description
Keywords
Equity Research Valuation Michelin Discounted Cash Flow Free Cash Flow to Firm Relative Valuation Multiples
Pedagogical Context
Citation
Pinheiro, Gonçalo Filipe Marques (2025). “Equity research: compagnie générale des établissements Michelin ”. Dissertação de Mestrado. Universidade de Lisboa. Instituto Superior de Economia e Gestão
Publisher
Instituto Superior de Economia e Gestão