TORM (CPSE:TRMD A) shares have delivered a 25% gain over the past 3 months, catching the attention of investors interested in the energy sector. The stock’s performance makes it a common conversation starter for those tracking Nordic shipping companies.
TORM’s recent 24.7% share price return over the last 90 days stands out against an otherwise steady year, suggesting that momentum may be building again after a relatively muted period. While the 12-month total shareholder return is just under 4%, the impressive 3-year total return above 30% shows there is still plenty of long-term potential here for patient investors.
With shares rising fast but some financial indicators suggesting a pause, is TORM trading at a bargain, or are investors already paying up for growth that could still be years away?
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Price-to-Earnings of 8.2x: Is it justified?
At the last close of DKK150, TORM is trading at a price-to-earnings (P/E) ratio of 8.2x, well below both peer and industry averages. This makes the stock stand out as potentially undervalued based on market comparables.
The price-to-earnings ratio measures how much investors are willing to pay for each Danish krone of earnings. For shipping and energy companies like TORM, it is a tried-and-true gauge of perceived earnings strength and future profitability.
With a P/E of 8.2x compared to a peer average of 15.2x and a European Oil and Gas industry average of 13.3x, TORM is valued at a meaningful discount. This suggests the market is not fully pricing in the company’s recent performance or future prospects, despite a history of strong profit growth.
However, investor optimism could be reined in if declining revenue and net income persist or if the current intrinsic discount narrows further in coming months.
Looking at TORM from our DCF model, the results add another layer to the analysis. The shares are trading around 14.9% below our estimate of fair value, which could indicate the market is underestimating the company. However, it is important to consider whether the DCF might be presenting an overly optimistic picture compared to potential near-term earnings pressure.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out TORM 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 870 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.
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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.
Valuation is complex, but we're here to simplify it.
Discover if TORM might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
