Torm PLC: Is This Deeply Undervalued Stock A Hidden Gem? -

Torm PLC: Is This Deeply Undervalued Stock A Hidden Gem?

Jan 19, 2025Jeremy ParkinsonFinance, No picture0

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As part of our ongoing series here at The Acquirer’s Multiple, each week we focus on one of the stocks from our Stock Screeners, and why it’s possibly a deeply undervalued gem.The Stock this week is:Torm PLC (TRMD)TORM PLC operates as a shipping company. The company owns and operates product tankers. It is engaged in the transportation of refined oil products. The company transports clean petroleum products including gasoline, jet fuel, naphtha, and diesel oil, as well as other clean products. Its segments include the Tanker segment, and Marine Exhaust segment.A quick look at the share price history (below) over the past twelve months shows that the price is down 36.48%.Source: Google FinanceOne of the metrics we use in our screens is IV/P (Intrinsic Value to Price). Let us simplify what it means:IV/P (Intrinsic Value to Price) tells you if a stock is a good deal or not based on how much value you’re getting for the price you pay. Here’s how it works:

The Calculation: It adds up the stock’s ability to make money (Earning Power), grow (Incremental Growth), and pay back investors (Shareholder Yield). This gives you an idea of what the stock is really worth, called its Implied Value.

The Meaning of IV/P:

If IV/P is greater than 1, it means you’re getting more value than you’re paying for. For example, for every $1 you invest, you’re getting more than $1 of value. That’s a good deal!
If IV/P is less than 1, it means you’re getting less value than you’re paying for. For example, for every $1 you invest, you’re getting less than $1 of value. That might not be a great deal.

What It’s Used For:

It’s a quick way to spot undervalued stocks (good deals).
If IV/P is very low, like 0.6 (you’re only getting 60 cents of value for $1), it’s likely overpriced.

Important Note: This is just an estimate. Other factors, like market trends or company issues, can affect how accurate this is.

So, IV/P helps investors find stocks that are “cheap” based on how much value they give back. Higher is usually better!We currently have an IV/P of 2.50 for Torm PLC, which means the stock’s Implied Value is calculated to be 2.50 times greater than its current price. In simpler terms:

For every $1 you invest, you’re potentially getting $2.50 of value.

This is an extremely high ratio, which might suggest the stock is deeply undervalued or that there’s some mispricing or unusual calculation in the data.

Possible Reasons for This Undervaluation:

Market Dynamics: The swift resolution of the U.S. port workers’ strike in early October 2024, which lasted only three days, led to a decrease in anticipated freight rate increases. Investors expecting a prolonged strike and higher freight charges reacted by selling off marine shipping stocks, including Torm.

Global Demand Concerns: The shipping industry is facing challenges due to lackluster global demand. Additionally, oil prices have not responded to geopolitical risks as they typically would, further impacting the industry’s performance.

Analyst Projections: Some analysts have expressed concerns about Torm’s growth prospects, suggesting limited potential for earnings per share (EPS) growth in the coming years.

Financial Metrics: Torm’s cash-to-debt ratio stands at 0.23, which is lower than 66.44% of companies in the Oil & Gas industry, indicating potential financial constraints.

Despite these challenges, Torm has reported solid financial results, the company has a FCF Yield of 15.60%.ROA 5-Year Average is 19.91%, and the Dividend Yield is 28%. We have the company on an Acquirer’s Multiple of 4.14.In summary, while Torm PLC exhibits strong financial performance and profitability, external market factors and analyst concerns may be contributing to its current undervaluation.More By This Author:Moody’s Corporation (MCO) DCF Valuation: Is The Stock Undervalued?
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