Is It Time To Reassess Ternium (NYSE:TX) After A 59% One Year Share Price Gain

• If you are wondering whether Ternium's current share price gives you good value, this article walks through what the numbers actually say and how that lines up with different valuation methods.
• Ternium's stock closed at US$43.33, with a 1 year return of 59.4% and a 5 year return of 96.2%. This comes even though the shares show a 0.7% decline over 7 days, a 1.1% decline over 30 days, and a 10.7% gain year to date.
• Recent coverage has put a spotlight on how investors are weighing steel demand, cost pressures, and regional exposure for producers like Ternium. These discussions help frame whether the recent pullback is seen as a breather after strong 1 year gains or a signal that expectations are being reassessed.
• Ternium currently has a valuation score of 5/6, which suggests that most of the checks on potential undervaluation line up. This sets the scene for comparing different valuation approaches, before finishing with a more complete way to think about what the stock might be worth.

Find out why Ternium's 59.4% return over the last year is lagging behind its peers.

Approach 1: Ternium Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a business could be worth by projecting its future cash flows and discounting them back to today using a required rate of return. It is essentially asking what those future cash flows are worth in current dollars.

For Ternium, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month Free Cash Flow is about $525.6 million. Analysts provide estimates for the early years, and Simply Wall St extrapolates further out, with projected Free Cash Flow reaching $1,002 million in 2030. All of these figures are in US$, even if reporting and listing currencies differ.

Putting those projected cash flows together and discounting them, the DCF model arrives at an estimated intrinsic value of about $78.97 per share. Compared with the recent share price of $43.33, this implies the stock trades at roughly a 45.1% discount to that estimate. On this specific cash flow based view, Ternium appears to be undervalued.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Ternium is undervalued by 45.1%. Track this in your watchlist or portfolio, or discover 56 more high quality undervalued stocks.

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

Approach 2: Ternium Price vs Earnings

For a profitable company like Ternium, the P/E ratio is a straightforward way to gauge what investors are currently paying for each dollar of earnings. It ties the share price directly to the bottom line, which is usually the main driver of long term returns.

What counts as a “fair” P/E depends on how the market views growth potential and risk. Higher expected earnings growth or lower perceived risk can support a higher multiple, while slower growth or higher risk tends to justify a lower one.

Ternium currently trades on a P/E of about 20.0x. That is below the Metals and Mining industry average of about 24.0x and also below a peer average of about 44.4x. Simply Wall St’s Fair Ratio for Ternium is 25.0x, which is its proprietary view of what the P/E could be given factors like earnings growth, industry, profit margins, company size and risk profile.

The Fair Ratio is more tailored than a simple comparison with peers or industry averages, because it adjusts for Ternium’s specific characteristics instead of assuming all companies deserve the same multiple.

With a current P/E of 20.0x versus a Fair Ratio of 25.0x, Ternium screens as trading below that reference level.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Ternium Narrative

Earlier we mentioned that there is an even better way to understand valuation, and on Simply Wall St this takes the form of Narratives. On the Community page you, and millions of other users, link your view of Ternium’s story to a simple forecast for revenue, earnings and margins. This then flows through to a Fair Value that you can compare directly with the current share price to decide if it looks attractive or expensive. The platform keeps that Fair Value updated as new news or earnings arrive. One investor might build a more optimistic Ternium Narrative anchored around a Fair Value of about US$43.00 per share and stronger earnings potential. Another might build a more cautious Narrative closer to US$26.00 per share that reflects higher discount rates and more modest assumptions. Both of those storylines are made explicit in numbers you can see, adjust and test for yourself.

Do you think there's more to the story for Ternium? Head over to our Community to see what others are saying!

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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