A Closer Look at Amentum Holdings (AMTM) Valuation After Recent Share Price Gains

Amentum Holdings (AMTM) has been getting attention after recent trading, with shares posting a 4% gain in the past day and 2% over the past week. Investors are watching for signals on what could drive the next move.

See our latest analysis for Amentum Holdings.

While Amentum Holdings' share price has picked up modestly in the past month, the bigger picture shows momentum cooling off, with the 1-year total shareholder return down 23%. This recent stretch follows earlier periods of growth, which signals that investor sentiment is still recalibrating as the company navigates changing market expectations.

If the latest moves from Amentum pique your curiosity, now is a great moment to extend your search and discover fast growing stocks with high insider ownership

With shares still trading well below analyst price targets, yet following a period of underwhelming returns, the real question is whether Amentum Holdings is presenting an undervalued opportunity or if investors are already factoring in future growth.

Price-to-Earnings of 108.4x: Is it justified?

Amentum Holdings currently trades at a lofty price-to-earnings (P/E) ratio of 108.4x, well above the last close of $23.16 and raising questions about whether optimism is driving its stock far ahead of current earnings power.

The P/E ratio measures how much investors are willing to pay today for one dollar of current earnings. For companies in the professional services sector, this metric helps gauge if expectations for growth and profitability are already reflected in the share price, or if the market is taking a more cautious view.

Compared to the US Professional Services industry average of 25.9x, Amentum’s P/E stands out as extremely high. This signals that investors are pricing in very strong future earnings growth or one-off items have recently distorted earnings. Notably, compared to an estimated fair P/E of 44.1x, the current multiple is still more than double what regression-based analysis suggests as reasonable. Market optimism, if not supported by rapid profit acceleration, may be hard to sustain in the long term.

Explore the SWS fair ratio for Amentum Holdings

Result: Price-to-Earnings of 108.4x (OVERVALUED)

However, slow revenue growth or sharply lower profitability could challenge the bullish view and prompt a re-evaluation of Amentum Holdings' elevated valuation.

Find out about the key risks to this Amentum Holdings narrative.

Another View: DCF Model Signals Undervaluation

While the price-to-earnings ratio paints a picture of Amentum Holdings as overvalued, our SWS DCF model offers a notably different perspective. It suggests the company's shares are trading at around 55% below estimated fair value, pointing to significant upside if those assumptions hold. Could this gap highlight a real opportunity, or does it reflect market skepticism?

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 Amentum Holdings 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 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 Amentum Holdings Narrative

If you see things differently or want to dig deeper into the numbers yourself, you can build your own analysis in just a few minutes, and Do it your way.

A great starting point for your Amentum Holdings research is our analysis highlighting 4 key rewards and 2 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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