Tenneco Inc (NYSE:TEN), a auto components company based in United States, saw significant share price volatility over the past couple of months on the NYSE, rising to the highs of $57.82 and falling to the lows of $44.69. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Tenneco’s current trading price of $47.48 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 Tenneco’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 Tenneco
What’s the opportunity in Tenneco?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 20% above my intrinsic value, which means if you buy Tenneco today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $39.73, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Tenneco’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Tenneco look like?
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 96.08% over the next couple of years, the future seems bright for Tenneco. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? TEN’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on TEN, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Tenneco. You can find everything you need to know about Tenneco in the latest infographic research report. If you are no longer interested in Tenneco, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.