Terex shares have pulled back in the short term, yet over the past few years the stock has still delivered a solid overall gain. This raises a simple question for investors: Is the current US$51.32 price tag still in line with the cash flows the business is expected to generate over time?
- Over the last 5 years, Terex has returned 25.4%, which puts a meaningful amount of long term value creation on the line if its cash flows do not support the latest share price.
- The group relies heavily on turning cyclical equipment demand into steady free cash flow, so shifts in order quality, pricing power or capital spending needs can alter how much value those future cash flows add up to today.
- Prefer to judge Terex on earnings? See what Terex's 40.5x P/E says about the price.
The issue now is whether Terex's current market value can be explained by the cash flows that its business is expected to produce in the years ahead.
If you are weighing Terex against other ideas where cash flow and valuation are front and center, a focused stock screen can help you compare it with 29 high quality undervalued stocks.
Is Terex Still Cheap on Cash Flow?
The Discounted Cash Flow (DCF) model here focuses on how much cash Terex can return to shareholders over time. Latest twelve month free cash flow sits at about $298.5m, and the projections behind this DCF assume that free cash flow grows from that base rather than shrinking.
Analysts feeding into the 2 Stage Free Cash Flow to Equity model expect Terex to lift annual free cash flow into the mid to upper hundreds of millions of dollars over the next decade, then grow more slowly after that as the business matures. When those future cash flows are discounted back to today and set against the current US$51.32 share price, the DCF output indicates that Terex's estimated intrinsic value is substantially above where the market is trading. Find out what Terex could be worth using our Discounted Cash Flow (DCF) estimate.
The Terex Narrative: What Would Justify Today's Price?
Terex Narratives on Simply Wall St pick up where the DCF puzzle leaves off and spell out which paths for revenue growth, profitability and earnings would need to play out for the shares to look materially higher or lower than today's price. Each scenario ties its valuation number to a specific view on where Terex's growth, margins and key risks go next, giving you something concrete to revisit as new information comes through.
One of the top community narratives on Terex: 36% undervalued
"The current valuation implies the market is cautious about Terex’s ability to sustain recent revenue growth, margin quality, and cash generation."
Discover why this Narrative puts Terex at 36% undervalued.
One more Terex check that belongs beside the valuation work
Price and cash flow only tell part of the story, because recent research on Terex has picked up specific business risks that deserve a look before you grow more confident. Take a closer look at 3 warning signs (2 major) before settling on a valuation.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com