Thinking about what to do with your Johnson Controls International shares, or considering if now is the time to jump in? You are not alone. The stock has been on an absolute tear, so anyone watching the market this year has likely noticed its upswing. Over just the past week, shares are up 1.3%. That may be a blip. But when you zoom out, the bigger story emerges: up 3.2% for the month, an impressive 38.8% year-to-date gain, and an eye-popping 181.3% return over five years. Clearly, something about Johnson Controls has caught the market’s attention.

Part of that might be the company’s positioning in critical infrastructure and smart building solutions, both of which keep rising in importance for global markets. Investors have viewed these sectors as increasingly resilient and growth-oriented, especially as companies and cities prioritize sustainability and energy efficiency projects. Those trends are hard to ignore and often get priced into a stock. Now, with excitement running high and the numbers to justify the enthusiasm, the big question is whether the current price tag is still fair, or if things have gotten ahead of themselves.

That brings us straight to valuation. If we do a traditional scorecard check, Johnson Controls International doesn’t exactly scream “undervalued.” Using six different valuation checks, it gets a value score of 0. Not a single box checked for bargain status. But that is only one way to judge a stock. Next, we will dig into what those valuations actually mean, and stick around because there is an even better way to think about value coming up at the end of this article.

Johnson Controls International scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and discounting them back to today's value. This method aims to determine what those expected dollars would be worth at present. For Johnson Controls International, the current Free Cash Flow stands at $2.89 Billion. Analysts have forecast continued growth with annual FCF projections reaching $3.34 Billion by 2029. While analyst estimates typically extend for about five years, further DCF projections for this analysis have been extrapolated beyond that, offering a longer-term view of potential performance.

Based on these projections and using a two-stage free cash flow to equity model, the estimated fair value for Johnson Controls International is $74.40 per share. When compared to the current share price, the DCF calculation indicates that the stock is trading at a 47.3% premium relative to its intrinsic value. In other words, shares appear to be significantly overvalued according to this model, with investors paying well above what discounted future cash flows would suggest is reasonable.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Johnson Controls International.

Our Discounted Cash Flow (DCF) analysis suggests Johnson Controls International may be overvalued by 47.3%. Find undervalued stocks or create your own screener to find better value opportunities.

For profitable companies like Johnson Controls International, the price-to-earnings (PE) ratio is a widely used valuation tool. It tells investors how much they are paying for each dollar of a company's earnings, giving a quick sense of whether a stock looks expensive relative to its profits. However, what qualifies as a “fair” PE ratio can vary depending on the company’s expected growth and perceived risks. Fast-growing companies or those with more stable earnings tend to justify higher PE multiples, while riskier or slower-growing firms tend to trade at lower ones.

Currently, Johnson Controls International has a PE ratio of 36.0x. For context, the average PE for its industry peers is 22.3x, and the peer group average comes in at 26.8x. Both of these benchmarks suggest that Johnson Controls commands a sizable premium to its sector, reflecting investor optimism about the company’s prospects.

This is where Simply Wall St's "Fair Ratio" comes into play. The Fair Ratio for Johnson Controls is calculated at 32.6x, factoring in the company's projected earnings growth, profit margins, its specific industry, overall market cap, and inherent risks. Unlike a simple comparison of peers or industry averages, the Fair Ratio provides a more tailored benchmark, taking into account the nuances that can influence how a company should be valued.

When we compare Johnson Controls’ current 36.0x PE to its Fair Ratio of 32.6x, the stock appears somewhat overvalued by this measure. This signals that investors are currently paying a premium, possibly reflecting high growth expectations or confidence in the company’s strategy and market positioning.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Earlier we mentioned there is an even better way to understand a stock’s true value, so let’s introduce you to Narratives. A Narrative is your personalized investment story, connecting why you believe in a company with the actual numbers you think it can achieve, like revenue growth, margins, and what a fair share price ought to be.

This approach goes beyond raw data or formulas by asking you to consider the unique drivers behind a company’s future. For example, do you think Johnson Controls International’s focus on smart building solutions and lean operational practices positions it to outperform? Or are you cautious about execution risks and market competition?

Narratives make valuation interactive and accessible: on Simply Wall St’s Community page, millions of investors share and update their own Narratives, linking their outlooks directly to fair value calculations that adjust instantly as news or company results come in. By comparing your Narrative’s fair value to today’s price, you can decide if it’s the right time to buy, hold, or sell.

For Johnson Controls International, the most optimistic Narratives see a fair value as high as $132.00, while the most cautious come in at $79.00, all based on different assumptions about future earnings growth and profitability. You can create your own view in just a few steps.

Do you think there's more to the story for Johnson Controls International? Create your own Narrative to let the Community know!

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 JCI.

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