Stock Analysis

At US$57.79, Is It Time To Put Trinseo PLC (NYSE:TSE) On Your Watch List?

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NYSE:TSE
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While Trinseo PLC (NYSE:TSE) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the NYSE. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Trinseo’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Trinseo

What's the opportunity in Trinseo?

Great news for investors – Trinseo 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. 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 Trinseo’s ratio of 8.03x is below its peer average of 21.06x, which indicates the stock is trading at a lower price compared to the Chemicals industry. However, given that Trinseo’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.

What does the future of Trinseo look like?

earnings-and-revenue-growth
NYSE:TSE Earnings and Revenue Growth February 14th 2022

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. However, with a relatively muted revenue growth of 3.3% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Trinseo, at least in the short term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since TSE is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. 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 TSE for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy TSE. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've found that Trinseo has 4 warning signs (3 make us uncomfortable!) that deserve your attention before going any further with your analysis.

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

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