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Is It Too Late To Consider Buying Trinseo S.A. (NYSE:TSE)?

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Simply Wall St
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Trinseo S.A. (NYSE:TSE), which is in the chemicals business, and is based in United States, led the NYSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on Trinseo’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Trinseo

What is Trinseo worth?

The stock seems fairly valued at the moment according to my relative valuation model. 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 18.86x is trading slightly below its industry peers’ ratio of 19.6x, which means if you buy Trinseo today, you’d be paying a reasonable price for it. And if you believe Trinseo should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Trinseo’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Trinseo generate?

NYSE:TSE Past and Future Earnings, November 22nd 2019
NYSE:TSE Past and Future Earnings, November 22nd 2019

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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted revenue growth of 0.4% 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? It seems like the market has already priced in TSE’s growth outlook, 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 TSE? 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 TSE, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive growth outlook may mean it’s worth diving deeper into other factors 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 Trinseo. You can find everything you need to know about Trinseo in the latest infographic research report. If you are no longer interested in Trinseo, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.