If you’ve been eyeing Archer Aviation lately, you’re not alone. The stock has been on a wild ride, up just 0.4% in the past week, but a jaw-dropping 264.2% over the last year. Plenty of investors are asking the same question: Is this growth just lift-off, or is turbulence ahead?
Why all the excitement? Headlines around successful eVTOL test flights and key partnerships with global airlines have helped fuel optimism. Investors also seem to be recalibrating their risk appetite, especially after government agencies signaled strong support for urban air mobility. That could have a lot to do with the stock’s staggering one-year gain and a recent 21.7% jump in just the last month. Even the year-to-date climb is impressive at 18.0%, hinting at a shift in how the market views both risk and opportunity in the air mobility space.
But the big question remains: Is Archer Aviation’s valuation truly justified? According to our assessment, the company lands a value score of 3 out of 6, meaning it’s undervalued in half the key areas we look at, but there’s still room for improvement. Of course, numbers only tell part of the story.
Let’s break down how we measure value, and then I’ll share what really matters most for those trying to get ahead of the curve.
A Discounted Cash Flow (DCF) model looks at a company’s future free cash flows, then discounts those projections back to today’s value to estimate how much the business is truly worth right now. This approach is widely used in growth sectors like aerospace where consistent profits might still be years away.
For Archer Aviation, the most recent free cash flow sits at -$472.3 Million, reflecting heavy investment and development costs. Analysts forecast that by 2029, annual free cash flow could swing to a positive $286 Million. Looking even further, projections out to 2035 estimate free cash flow climbing steadily each year, all denominated in US Dollars. These assumptions combine analyst forecasts for the next five years and are followed by extended projections to capture the full growth profile of the business as provided by Simply Wall St.
The results are compelling. The DCF analysis estimates a fair value for Archer Aviation at $29.72 per share. With the stock currently trading at a level that implies a 62% discount to this intrinsic value, the company appears deeply undervalued by this measure.
Our Discounted Cash Flow (DCF) analysis suggests Archer Aviation is undervalued by 62.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.
The price-to-book (PB) ratio is a common valuation tool, especially useful for companies that are not yet profitable. For innovative players like Archer Aviation, early gains are typically reinvested for future growth, making traditional measures like price-to-earnings less informative. Instead, PB offers a direct way to see how the market values the company’s assets relative to its book value today.
Growth potential and business risks both affect what counts as a “fair” PB ratio. When investors expect rapid growth or industry-changing breakthroughs, they may accept a higher PB. On the other hand, higher risks or inconsistent financial results usually justify a lower multiple.
Currently, Archer Aviation trades at a PB ratio of 4.33x. This puts it just below the peer average of 4.45x and above the Aerospace & Defense industry average of 3.71x. While these comparisons are helpful, they do not capture the nuances unique to Archer’s profile.
This is where Simply Wall St’s “Fair Ratio” comes in. The Fair Ratio is designed to reflect the PB multiple that best fits Archer’s specific growth outlook, profit margins, risks, and overall market cap. Unlike standard benchmarks, it looks beyond broad industry averages and peer groups, providing a more tailored picture of valuation.
When comparing Archer’s actual PB ratio to the Fair Ratio, the difference is minimal, suggesting the market price is a solid match for its fundamentals right now.
Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives. A Narrative is your own story or perspective on a company, grounded in your assumptions about its future revenue, earnings, margins, and what you believe is a fair value. Narratives make the numbers come alive by tying your outlook for Archer Aviation directly to a financial forecast and then calculating a fair value based on your beliefs.
On Simply Wall St’s platform, Narratives are easy to create and available for millions of investors to use within the Community page. Narratives help you decide when to buy or sell by comparing your Fair Value to the current Price. They update automatically whenever new information like earnings or major news is released.
This means investors can quickly respond to fresh developments, refine their forecasts, and see how their story stacks up against others. For example, one investor’s Narrative may see Archer’s fair value as high as $36 per share, while another might estimate it at just $11 based on a more cautious outlook.
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.
