Stock Analysis

When Should You Buy Trinseo PLC (NYSE:TSE)?

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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 received a lot of attention from a substantial price increase on the NYSE over the last few months. 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. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Trinseo’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Trinseo

Is Trinseo still cheap?

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 8.81x is below its peer average of 23.7x, 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.

Can we expect growth from Trinseo?

earnings-and-revenue-growth
NYSE:TSE Earnings and Revenue Growth November 2nd 2021

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Trinseo's revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since TSE is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure 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 prosperous 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.

So while earnings quality is important, it's equally important to consider the risks facing Trinseo at this point in time. Be aware that Trinseo is showing 3 warning signs in our investment analysis and 2 of those don't sit too well with us...

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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