Garrett Motion (GTX) Following Russell Index Removal Is The Stock Fully Valued

Index removal puts fresh attention on Garrett Motion stock

Garrett Motion (GTX) has been removed from both the Russell 2000 Defensive Index and the Russell 2000 Value-Defensive Index. This kind of change can prompt portfolio shifts by index-tracking investors.

The adjustment is drawing new attention to how the stock is priced compared with its fundamentals, as some funds review their positions and other investors consider whether the change affects the role of Garrett Motion in their portfolios.

See our latest analysis for Garrett Motion.

At a share price of $35.11, Garrett Motion has shown strong momentum, with a 30 day share price return of 7.17%, a 90 day share price return of 93.23%, and a 1 year total shareholder return of 239.40%. This suggests the index removals are being weighed against a period of robust recent performance.

If Garrett Motion's recent moves have you thinking about where else growth and risk are being repriced, it may be worth scanning 35 power grid technology and infrastructure stocks

So with Garrett Motion trading near its analyst price target and a modelled intrinsic value that sits lower than the market price, should you see the recent index removal as a fresh buying opportunity, or as a sign that future growth is already reflected in the valuation?

Most Popular Narrative: 1.6% Undervalued

Against Garrett Motion's last close of $35.11, the most followed narrative points to a fair value of $35.67, built on detailed assumptions about future contracts, product mix and margins.

Ongoing innovation and proof of concept awards in zero emission technologies (E Powertrain, E Cooling, and fuel cell compressors) and expansion in industrial/non automotive end markets are positioning Garrett to capture higher margin business opportunities and diversified growth, supporting both revenue and future margin expansion.

Read the complete narrative.

Want to see how this ties together? The narrative leans heavily on incremental revenue, richer margins and a lower future earnings multiple. Curious which assumptions really underpin that fair value.

Result: Fair Value of $35.67 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, Garrett Motion's reliance on gasoline and diesel turbocharger revenue, combined with margin pressure from a less favorable sales mix, could challenge the otherwise upbeat narrative.

Find out about the key risks to this Garrett Motion narrative.

Another view on Garrett Motion's valuation

While the most followed Garrett Motion narrative points to a modest 1.6% gap between fair value of $35.67 and the $35.11 share price, the earnings based lens tells a different story. On a P/E of 19.2x, the stock trades above a fair ratio of 17.5x and the peer average of 15.2x, even though it sits below the US Auto Components industry on 21.7x. That mix of richer pricing than peers, but still cheaper than the broader industry, leaves investors weighing whether this is valuation risk building in, or a premium that could be sustained.

For a closer look at how the earnings multiple stacks up against fundamentals, and how that fair ratio might shift if assumptions change, See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

If this mix of opportunities and concerns around Garrett Motion leaves you undecided, take the time to review the underlying data and form your own judgment using the 3 key rewards and 3 important warning signs

Looking for more investment ideas beyond Garrett Motion?

If Garrett Motion has sharpened your focus on pricing and risk, it is worth lining up a few more candidates that match the kind of portfolio you want to build.

Use the Simply Wall Street Screener to spot fresh opportunities before they get crowded, so you are not looking back later wishing you had moved sooner.

• Target potential value opportunities by scanning 44 high quality undervalued stocks that pair quality fundamentals with pricing some investors may be overlooking.
• Build a sturdier core in your portfolio by reviewing solid balance sheet and fundamentals stocks screener (48 results) that focus on companies with stronger financial footing.
• Hunt for future standouts by filtering through a screener containing 19 high quality undiscovered gems that highlights lesser known stocks with solid underlying metrics.

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.