Is Tronox Holdings (TROX) Still Attractive After Its Strong Year To Date Rally

• Investors may be wondering whether Tronox Holdings at around US$9.12 still offers value, or if most of the opportunity is already priced in.
• The stock has returned 0.4% over the last week, 20.2% over the last month, 113.6% year to date and 84.7% over the past year, set against longer term 3 year and 5 year returns of a 22.8% decline and a 46.2% decline.
• These mixed time frames suggest the recent strength may reflect a shift in how the market views the company, while the weaker multi year record still weighs on longer term performance. For investors, that combination raises a fair question about whether recent optimism is backed by fundamentals or sentiment.
• Tronox Holdings currently has a valuation score of 2 out of 6. The sections that follow explain what that means using several common valuation methods, then finish with a framework that can help you judge the company’s value in a more holistic way.

Tronox Holdings scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Tronox Holdings Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company could be worth by projecting its future cash flows and discounting them back to today’s value.

For Tronox Holdings, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is a loss of $259.3 million, so the model leans heavily on future projections. Analyst and extrapolated estimates suggest free cash flow reaching $95.5 million by 2028, with a series of forecast figures through to 2035, all expressed in dollars and then discounted back to today.

Bringing those discounted cash flows together gives an estimated intrinsic value of about $13.39 per share. Compared with a recent share price around $9.12, the DCF output implies the stock trades at roughly a 31.9% discount to this estimate, which indicates that Tronox Holdings appears undervalued on this model alone.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Tronox Holdings is undervalued by 31.9%. Track this in your watchlist or portfolio, or discover 59 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 Tronox Holdings.

Approach 2: Tronox Holdings Price vs Book

For asset heavy businesses like Tronox Holdings, the price to book (P/B) ratio is often a useful cross check because it compares the share price with the accounting value of net assets. It helps you see how much you are paying for each dollar of book value.

Growth expectations and risk still matter, even with P/B. Companies with stronger growth prospects or lower perceived risk often trade at higher P/B multiples, while slower growth or higher uncertainty tends to justify a lower multiple.

Tronox Holdings currently does not have a stated P/B ratio in the data provided, but the Chemicals industry average sits around 1.56x and the peer group used here screens at about 2.47x. Simply Wall St also uses a proprietary “Fair Ratio” for the preferred multiple, which estimates what a reasonable P/B might be after weighing factors such as earnings growth, margins, size and company specific risks.

This Fair Ratio can be more tailored than a simple comparison with industry or peer averages, because it adjusts for Tronox Holdings’ own profile rather than assuming it should trade like a typical Chemicals stock. In this case, the absence of a Fair Ratio figure means there is no clear signal on whether the current valuation is rich or cheap on a P/B basis.

Result: ABOUT RIGHT

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Upgrade Your Decision Making: Choose your Tronox Holdings Narrative

Earlier the article mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St’s Community page let you attach a clear story to the numbers by linking your view of Tronox Holdings (for example, whether you think earnings and margins look more like the bearish US$4.37 fair value case or the bullish US$8.00 fair value case) to a forecast and a fair value that is then compared with the current price. This is updated automatically as news or earnings arrive, so you can see in one place whether your Narrative suggests the stock is overpriced or underpriced and how that aligns or conflicts with what other investors are assuming.

Do you think there's more to the story for Tronox Holdings? 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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