What is TEN's Intrinsic value?

Tenneco Inc (TEN) Intrinsic Value Analysis

Executive Summary

As of June 21, 2025, Tenneco Inc's estimated intrinsic value ranges from $32.32 to $275.81 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $117.71 +468.1%
Discounted Cash Flow (5Y) $32.32 +56.0%
Dividend Discount Model (Multi-Stage) $54.28 +162.0%
Earnings Power Value $275.81 +1231.1%

Is Tenneco Inc (TEN) undervalued or overvalued?

With the current market price at $20.72, the stock appears to be significantly undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Tenneco Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.42 2.34
Cost of equity 10.4% 18.0%
Cost of debt 5.9% 9.1%
Tax rate 21.7% 36.3%
Debt/Equity ratio 8.58 8.58
After-tax WACC 5.2% 7.1%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 6.1% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $18,035 (FY12-2021) to $38,976 (FY12-2031)
  • Net profit margin expansion from 1% to 1%
  • Capital expenditures maintained at approximately 4% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $32 $5,589M 79.8%
10-Year Growth $118 $8,162M 71.6%
5-Year EBITDA $42 $5,886M 80.8%
10-Year EBITDA $110 $7,924M 70.8%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 14.2%
  • Long-term growth rate: 2.0%
  • Fair value: $54.28 (162.0% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 18.0% (Low) to 10.4% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $(33) to $(96)
  • Selected fair value: $-64.46 (-411.1% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $775M
Discount Rate (WACC) 7.1% - 5.2%
Enterprise Value $10,952M - $14,898M
Net Debt $4,615M
Equity Value $6,337M - $10,283M
Outstanding Shares 30M
Fair Value $210 - $341
Selected Fair Value $275.81

Key Financial Metrics

Metric Value
Market Capitalization $624M
Enterprise Value $5239M
Trailing P/E 0.00
Forward P/E 2.96
Trailing EV/EBITDA 4.40
Current Dividend Yield 737.82%
Dividend Growth Rate (5Y) -100.00%
Debt-to-Equity Ratio 8.58

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 35% $35.31
Discounted Cash Flow (5Y) 29% $8.08
Dividend Discount Model (Multi-Stage) 24% $10.86
Earnings Power Value 12% $27.58
Weighted Average 100% $96.27

Investment Conclusion

Based on our comprehensive valuation analysis, Tenneco Inc's weighted average intrinsic value is $96.27, which is approximately 364.6% above the current market price of $20.72.

Key investment considerations:

  • Strong projected earnings growth (1% to 1% margin)
  • Consistent cash flow generation

Given these factors, we believe Tenneco Inc is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.