Temenos (SWX:TEMN): Assessing Valuation After a Strong Three-Month Share Price Rebound

Temenos (SWX:TEMN) has quietly climbed about 6% over the past week and more than 30% in the past 3 months, putting fresh attention on whether this banking software specialist’s rebound still has room to run.

See our latest analysis for Temenos.

That recent momentum builds on a solid recovery trend, with a strong 90 day share price return helping push year to date gains higher. A 1 year total shareholder return above 35% suggests confidence is slowly coming back after a tougher multi year stretch.

If Temenos has you rethinking what quality looks like in financial tech, it could be a good moment to explore high growth tech and AI stocks for more potential ideas.

Yet with the share price now sitting slightly above analyst targets and only modest fundamental growth, the key question is whether Temenos is still trading below its true potential or if markets are already pricing in the next leg of expansion.

Price to Earnings of 21.1x: Is it justified?

At a last close of CHF 77.50, Temenos trades on a 21.1x price to earnings multiple, which screens as inexpensive versus software peers despite the recent rally.

The price to earnings ratio compares what investors pay for each unit of the company’s current earnings, a key yardstick for profitable, mature software firms like Temenos.

With earnings having grown 118.7% over the past year and margins improving, a mid 20s multiple suggests the market is not aggressively pricing in that rebound.

Compared with the European software industry average of 26.7x and a peer average of 48.6x, Temenos carries a marked valuation discount that implies investors remain cautious despite the strong recent profit acceleration.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price to Earnings of 21.1x (UNDERVALUED)

However, lingering concerns around modest revenue growth and last year’s net income decline could quickly challenge the idea that Temenos’ recovery is firmly established.

Find out about the key risks to this Temenos narrative.

Another View on Value

Our DCF model is slightly more cautious, putting Temenos fair value near CHF 75.8, a touch below the current CHF 77.5 share price. This points to the stock being marginally overvalued rather than clearly cheap.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Temenos for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 906 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Temenos Narrative

If you see the numbers differently or want to stress test your own thesis, you can build a personalised view in just a few minutes: Do it your way.

A great starting point for your Temenos research is our analysis highlighting 3 key rewards and 4 important warning signs that could impact your investment decision.

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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.

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