Sign InSummary
TMC the Metals Company Inc. shows strong demand and positive developments, but concerns about profitability; technical analysis indicates a potentially overbought condition but signals a bullish trend, suggesting a short-term pullback followed by continued upward trajectory; it would be categorized as a 'Hold'. (Analysis conducted on July 5, 2023)
Fundamental Analysis
TMC the Metals Company Inc. (NASDAQ: TMC) shows a market capitalization of $672.13 million with 280.64 million shares outstanding. The recent closing price of this company's stock was $2.40 (as of July 5, 2023), a significant 22.82% increase compared to the previous trading day. This significant price difference indicates a considerable demand for the stock, marked by a high trading volume of 17.19 million shares compared to the average volume of 1.70 million shares.
The provided Earnings Per Share (EPS) value is -$0.61, indicating the company is currently unprofitable. Furthermore, the negative Price-to-Earnings (PE) ratio of -3.93 also reflects the company's unprofitability. Therefore, from a fundamental perspective, there are concerns about the company's ability to generate profits.
Despite these concerns, recent news about the company points to positive developments. For instance, the Earnings conference calls indicate that TMC has been active in providing updates on the company's first quarter 2023 financial results and recent corporate developments. Also, the publication labeling TMC a 'High-Growth Penny Stock' could suggest an optimistic growth projection for the company.
Technical Analysis
The 14-period Relative Strength Index (RSI) reading is 75, which indicates a potentially overbought condition. It suggests that the stock has been witnessing strong buying pressure recently, but there might also be a reversal or short-term pullback in the near future.
The Moving Average Convergence Divergence (MACD) for the last three months stands at 0.318, which signals a bullish trend of the stock. This is further substantiated by the fact that both the 50-day moving average (0.95) and 200-day moving average (0.91) are far below the last closing price.
Moreover, TMC has seen a year-low price of $0.51 and a year-high price of $2.56. The current price, being closer to the year-high, further indicates a strong upward trend.
The Discounted Cash Flow (DCF) stands at around $2.59, slightly higher than the last closing price. This suggests that the stock may be undervalued.
Predicted Stock Performance
Projecting forward based on the available technical and fundamental analysis data, the stock price might experience a short-term pullback due to overbuying indicated by the RSI. However, in the long-term, the upward trend is expected to continue due to the MACD indicator and the position of the current price against the moving averages. Therefore, by the end of the next trading day on July 6, 2023, the stock may face a slight price correction, but by the end of the following week, it is expected to recoup and continue its upward trajectory, potentially nearing or exceeding its DCF value of $2.59.
Final Evaluation
Although TMC is currently unprofitable, as indicated by its negative EPS and PE ratio, its promising growth potential and bullish trend as identified through technical indicators suggest a positive outlook. Considering the combination of the fundamental and technical elements, TMC would be categorized as a 'Hold'. While the stock shows positive momentum currently, the company's profitability remains a concern. Therefore, investors should keep a close eye on the company's future earning reports and corporate developments to make a well-informed decision.
