A Fresh Look at Ternium (NYSE:TX) Valuation After Softer Earnings and Cautious Outlook

Ternium (NYSE:TX) reported third-quarter results that came in below expectations, with revenue and earnings declining from the same period last year. The company’s update included forward guidance that anticipates softer shipments and profits next quarter.

See our latest analysis for Ternium.

Ternium’s share price has quietly climbed 23% year to date, despite a choppy market backdrop and this quarter’s earnings miss. The stock’s momentum has actually picked up; its 90-day share price return sits at 17%, while longer-term total shareholder returns top 15% over one year and a hefty 138% across five years, showing the company’s ability to create value even as short-term trading sentiment wavers.

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With the stock up double digits this year but future earnings growth in question, investors must now weigh whether Ternium is trading at a bargain or if the market has already factored in its forward prospects.

Most Popular Narrative: Fairly Valued

With Ternium closing at $36.03, the most widely followed narrative estimates a fair value of $35.65, leaving little room between current price and target. This narrative holds that key industry and company-specific forces are both at play, setting the stage for a deeper look at what is driving the valuation.

“Recent government measures to curb unfair steel imports and close loopholes in Mexico are expected to reduce foreign competition, enhance local market share for Ternium, especially in flat steel products, and support higher realized prices, driving improved revenues and EBITDA margins over the next quarters.”

Read the complete narrative.

Wonder what these analysts see on the horizon? Their numbers bank on stronger margins and pricing power. But the full formula behind this fair value rests on a handful of assumptions that could swing the story much higher or lower. Curious which growth levers matter most right now? Unlock the rest of the narrative to see what might tip the scale.

Result: Fair Value of $35.65 (ABOUT RIGHT)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent global steel overcapacity or rising costs from energy and decarbonization efforts could put pressure on Ternium’s margins and challenge this fair value case.

Find out about the key risks to this Ternium narrative.

Another View: What Does the SWS DCF Model Say?

Looking beyond market multiples, our DCF model paints a very different picture. It estimates Ternium’s fair value at $84.93, which is far above the current price. This method suggests Ternium may be significantly undervalued compared to the earlier consensus. Could the real opportunity be hidden in future cash flows?

Look into how the SWS DCF model arrives at its fair value.

Build Your Own Ternium Narrative

If the expert view doesn’t match your analysis, or you’d rather draw your own conclusions, you can dig into the numbers and craft your own perspective on Ternium in just a few minutes with Do it your way.

A great starting point for your Ternium research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision.

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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.