Why Terminix Global Holdings, Inc. (NYSE:TMX) Could Be Worth Watching

By
Simply Wall St
Published
November 29, 2021
NYSE:TMX
Source: Shutterstock

While Terminix Global Holdings, Inc. (NYSE:TMX) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$45.44 at one point, and dropping to the lows of US$38.71. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Terminix Global Holdings' current trading price of US$38.71 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Terminix Global Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Terminix Global Holdings

Is Terminix Global Holdings still cheap?

Terminix Global Holdings appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Terminix Global Holdings’s ratio of 39.74x is above its peer average of 18.88x, which suggests the stock is trading at a higher price compared to the Consumer Services industry. Furthermore, Terminix Global Holdings’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Can we expect growth from Terminix Global Holdings?

earnings-and-revenue-growth
NYSE:TMX Earnings and Revenue Growth November 30th 2021

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 55% over the next couple of years, the future seems bright for Terminix Global Holdings. 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? It seems like the market has well and truly priced in TMX’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe TMX should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on TMX for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for TMX, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Terminix Global Holdings at this point in time. Every company has risks, and we've spotted 1 warning sign for Terminix Global Holdings you should know about.

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

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.