-
Ever found yourself wondering if Archer Aviation is a hidden gem or flying a bit too close to the sun? You are not alone. Plenty of investors are curious about where the value really lies in this up-and-coming name.
-
The stock recently jumped 8.5% over the past week, but it is still down 18.6% year-to-date and has seen a steep 30.3% drop in the last month, showing just how quickly market sentiment can change.
-
Part of the recent volatility ties back to news on its FAA certification progress and strategic partnerships, which have made headlines for both positive hype and fresh speculation about timelines. Investors have been dissecting these updates for clues about Archer’s future runway in the emerging eVTOL space.
-
When it comes to the numbers, Archer Aviation currently scores 3 out of 6 on our valuation checks, reflecting a mix of strengths and weaknesses. We will dig into what this score actually means and compare different ways to assess value. Stick around for an approach that ties it all together at the end of the article.
Find out why Archer Aviation’s -18.6% return over the last year is lagging behind its peers.
The Discounted Cash Flow (DCF) model estimates what a stock is really worth today by projecting a company’s future cash flows and discounting them back to their present value. For Archer Aviation, this approach means looking at how much cash the company is likely to generate in the coming years and adjusting for the risks and time value of money.
Currently, Archer Aviation’s Free Cash Flow (FCF) stands at -$481.4 million, reflecting heavy investment and expected losses typical for early-stage innovators in the eVTOL space. Analyst estimates project FCF turning positive by 2028, and by 2029, FCF is expected to reach $232 million. By 2035, projections extend even further, with annual FCF potentially climbing to about $1.22 billion, according to Simply Wall St’s extrapolation.
Running these numbers through the Two-Stage Free Cash Flow to Equity model delivers an intrinsic share value of $22.38. This figure is 65.2% above the current market price, suggesting the stock may be undervalued at present levels.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Archer Aviation is undervalued by 65.2%. Track this in your watchlist or portfolio, or discover 920 more undervalued stocks based on cash flows.
The Price-to-Book (P/B) ratio is a commonly used valuation metric for companies that may not yet be profitable, such as Archer Aviation. This metric allows investors to gauge how the market values the company relative to its net asset base, which is especially important for early-stage innovators whose earnings may still be negative.
Typically, a “normal” or “fair” P/B ratio for the Aerospace & Defense sector is influenced by expectations for future growth and perceived risk. Strong growth prospects or lower business risk can justify higher P/B multiples. Increased uncertainty tends to push them lower.
Currently, Archer Aviation trades at a P/B ratio of 3.45x. This sits just below the peer average of 3.96x and is closely aligned with the industry average of 3.44x. On the surface, this suggests Archer’s valuation is right in line with the broader sector.
Simply Wall St offers a proprietary “Fair Ratio,” which tailors the expected P/B multiple by factoring in Archer’s growth outlook, profit margins, risk profile, industry norms, and even its market capitalization. This holistic measure goes beyond simple peer or industry averages to capture a more complete picture of the company’s true value.
In comparing Archer Aviation’s current P/B ratio of 3.45x to its Fair Ratio, the difference is minimal. This indicates the stock is valued about right based on this metric.
Result: ABOUT RIGHT
PB ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1441 companies where insiders are betting big on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is an investor’s personal storyline about a company, connecting the dots between its growth prospects, financial estimates, and what they believe is a fair value for the stock. Narratives make investing accessible by allowing you to share your viewpoint and see how it influences projected revenue, earnings, margins, and ultimately the estimated share price.
On Simply Wall St’s Community page, millions of investors use Narratives to blend the company’s story with data, creating forecasts and fair value estimates they can actually trust. By comparing a Narrative’s Fair Value with today’s market price, investors can decide when to buy or sell based on the story they believe in. Narratives are dynamic, updating automatically as new news or earnings reports are released, helping you stay ahead of rapid market shifts.
For Archer Aviation, for example, some investors are highly optimistic about certification timelines and urban air mobility growth, while others see significant risks and longer delays. This leads to very different fair value outcomes in their Narratives.
Do you think there’s more to the story for Archer Aviation? Head over to our Community to see what others are saying!
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 ACHR.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com