Assessing TGS Shares After Latest Sector Turbulence and Sharp Price Drop

Wondering what to do with TGS stock right now? You are not alone. The company’s share price has plenty of investors reaching for their calculators, debating whether this could be a compelling entry point or a signal to tread carefully. TGS’s stock recently closed at 72.5, and even though the broader market has seen some recovery glimmers, TGS has not yet shared in that optimism. Over just the past week, the stock slipped -4.7%, following a month-long return of -1.8%. The bigger picture feels even heavier, with a year-to-date decline of -38.4% and a five-year return of -16.4%. That is a journey that asks for sharp analysis before making your next move.

The market’s evolving view of TGS is partly shaped by recent sector shifts bringing a new sense of risk and reward. Investors are weighing up whether the declines signal long-term issues or might present undiscovered value. That conversation brings us straight to valuation, and here, the numbers tell an interesting story: TGS scores just 2 out of 6 on key undervaluation checks, hinting that, by traditional metrics, there may be selective, though not sweeping, opportunities.

So, how do these valuation approaches stack up? Is there a smarter way to understand whether TGS is truly undervalued? Let us dive into the details and explore a more holistic angle that could change how you look at this stock altogether.

TGS scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: TGS Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s value by projecting its future cash flows and discounting them back to today’s dollars. For TGS, this approach starts with its current Free Cash Flow of $202.6 Million, then considers expected growth over the years ahead. Analyst estimates reach to 2027, with projected Free Cash Flow increasing to $212.3 Million. Beyond that, projections are extrapolated to 2035, but these estimates become less certain as time passes.

The DCF analysis used for TGS follows a 2 Stage Free Cash Flow to Equity model. This method calculates the intrinsic fair value of the stock at $209.70 based on cash flow projections and appropriate discount rates. In comparison, the market price is currently much lower, at 72.5 NOK per share. As a result, the DCF model indicates the stock is trading at a 65.4% discount to its intrinsic value, which suggests notable undervaluation.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests TGS is undervalued by 65.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: TGS Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation tool for profitable companies because it connects a company's share price directly to its earnings power. For businesses like TGS that are posting profits, the PE ratio offers everyday investors a simple way to compare value across the sector and spot possible under- or overvalued stocks. However, it is important to remember that growth expectations and risk levels also shape what a "fair" PE should look like. Firms with higher growth or lower risk can justify higher multiples, while riskier or slower-growing companies typically trade at lower PE ratios.

At the moment, TGS trades at a PE ratio of 57.76x. To put that in context, the average PE for its Energy Services industry peers stands much lower, at just 6.64x. The typical peer’s ratio hovers around 5.44x. This signals TGS trades at a substantial premium against both its sector and direct competition. But raw comparisons only tell part of the story.

This is where Simply Wall St's proprietary "Fair Ratio" comes into play. Unlike a basic industry or peer average, the Fair Ratio incorporates a wider range of factors, including expected earnings growth, profit margins, sector trends, company size and specific risks, to calculate a more precise benchmark for what TGS’s multiple should be in today’s market. For TGS, the Fair Ratio is estimated at 17.35x. Given that TGS’s actual PE is markedly higher than this (57.76x versus 17.35x), it suggests that the market may be pricing in far more optimism than the fundamentals justify, making the stock appear overvalued by this method.

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.

Upgrade Your Decision Making: Choose your TGS Narrative

Earlier, we mentioned that there’s an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your own story or perspective on a company, where you connect what you believe about TGS’s future, such as industry changes, company strategy, or upcoming risks, with your expectations of its revenue, profits, and fair value.

With Narratives, you actively link the company’s story to specific financial forecasts and a calculated fair value, turning raw numbers into real-world decisions. Available on Simply Wall St’s Community page, a platform used by millions, Narratives are designed to be simple and accessible for all investors, whether you are a beginner or an expert.

Narratives help you decide when to buy or sell by comparing your calculated fair value with the current share price, updating automatically as new earnings or news arrive so your view always stays relevant.

For example, one TGS Narrative envisions strong cost synergies and global growth, leading to a fair value of 180 NOK. Another projects revenue weakness and risk, resulting in a much more cautious view at 65 NOK. This lets you see both the best- and worst-case scenarios as the market evolves.

Do you think there's more to the story for TGS? 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.

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