Is Tremor International Ltd (LON:TRMR) Potentially Undervalued?

By
Simply Wall St
Published
April 09, 2022
AIM:TRMR
Source: Shutterstock

Tremor International Ltd (LON:TRMR), might not be a large cap stock, but it saw a decent share price growth in the teens level on the AIM over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on Tremor International’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Tremor International

What is Tremor International worth?

Great news for investors – Tremor International is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 14.98x is currently well-below the industry average of 30.73x, meaning that it is trading at a cheaper price relative to its peers. However, given that Tremor International’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Tremor International?

earnings-and-revenue-growth
AIM:TRMR Earnings and Revenue Growth April 9th 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 38% over the next couple of years, the future seems bright for Tremor International. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? Since TRMR is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on TRMR for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy TRMR. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Tremor International.

If you are no longer interested in Tremor International, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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