Has TechnipFMC’s Recent 59% Stock Surge in 2024 Gone Too Far?

Thinking about what to do with TechnipFMC right now? You are not alone. The stock has caught the eye of both cautious and adventurous investors recently, and there is good reason for that. Over the past year, TechnipFMC shares have soared by 59.0%, leaving many wondering if the price still makes sense or if we are due for a reassessment. Looking further back, the gains are even more staggering, with a 796.7% return over five years and a 385.6% jump in the last three years alone.

Much of the momentum can be traced to the company’s strong positioning in energy services and some well-timed strategic moves in the evolving energy sector. While the stock’s 2.4% climb in just the past week and a 10.4% jump over the last month hint at a renewed sense of optimism among market participants, there is also an undercurrent of changing risk perceptions as attention shifts from growth stories to value opportunities. Year-to-date, TechnipFMC is up 36.5%, which is hard to ignore in any performance comparison.

However, if we step back from all the price excitement to look at a straightforward valuation scorecard, TechnipFMC is currently seen as undervalued in just one out of six key checks. This raises some important questions about whether recent moves have run ahead of fundamentals or if there is still hidden value to unlock.

Next, we will break down the standard valuation approaches to see what they reveal about TechnipFMC. And make sure to stick around, because the best way to judge the company’s value might be one that even experienced investors tend to overlook.

TechnipFMC scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: TechnipFMC Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and discounting them back to their present value. This approach helps investors gauge what a business is truly worth today based on its expected cash generation.

For TechnipFMC, the most recent reported Free Cash Flow (FCF) stands at $1.43 billion. Analyst estimates suggest that FCF will grow over the coming years, reaching about $1.19 billion by 2029. Although analysts typically provide reliable estimates for only five years, projections beyond that are generated by extrapolation to estimate longer-term trends.

According to the DCF model, TechnipFMC’s intrinsic value is $50.42 per share. This value implies a 19.9% discount compared to the current market price, which indicates that the stock is undervalued by this measure.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests TechnipFMC is undervalued by 19.9%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: TechnipFMC Price vs Earnings

The Price-to-Earnings (PE) ratio is a favored metric for valuing profitable companies like TechnipFMC, as it directly measures how much investors are willing to pay for each dollar of current earnings. It is especially relevant for businesses with stable profits, as it reflects both immediate performance and market sentiment about future growth prospects.

However, what constitutes a “fair” PE ratio is not set in stone. Higher growth businesses often command higher PE multiples, while those facing more uncertainty or lower earnings growth tend to trade at lower PE ratios. Risk factors such as earnings volatility and industry trends also play a significant role in shaping this norm.

Looking at TechnipFMC, the company currently trades at a PE ratio of 17.7x. For comparison, the average for the Energy Services industry is 15.2x, while selected peers across the sector trade at an average PE of 12.9x. At first glance, this means TechnipFMC appears a little more expensive.

This is where Simply Wall St’s Fair Ratio comes in. Unlike basic peer or industry comparisons, the Fair Ratio is calculated by factoring in company-specific elements like earnings growth, profit margins, market capitalization, and risk profile. For TechnipFMC, the Fair Ratio is assessed at 15.8x, suggesting that the ideal multiple for this business, based on its unique fundamentals, is slightly below where the stock currently trades.

Since the difference between the actual PE and the Fair Ratio is less than 0.10, TechnipFMC’s valuation is judged to be about right based on this approach.

Result: ABOUT RIGHT

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 TechnipFMC Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives. A Narrative is a simple, yet powerful, tool where you lay out your own perspective and expectations for a company and connect that “story” directly to a financial forecast and a fair value estimate, putting numbers behind your reasoning instead of just following the crowd.

On Simply Wall St’s Community page, investors worldwide share Narratives as accessible “what-if” scenarios. Each links the company’s business outlook, future revenue, profit margins, and risks to a price target. Narratives help you decide when to buy or sell by comparing your estimated Fair Value to the current market Price, and as new information like earnings or major news arrives, Narratives auto-update, ensuring your view stays relevant.

For example, right now TechnipFMC’s most optimistic Narrative expects a $51.00 price target, betting on accelerated offshore expansion and margin gains. The most cautious Narrative sees value at $30.00 due to uncertainties around global energy shifts and competition, allowing every investor to ground their conviction in actual numbers rather than just stories.

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