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If you are wondering whether Teleperformance at €52.72 is a bargain or a value trap, you are in the right place to scrutinise what the current share price might actually represent.
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The stock has had a difficult run, with returns of 3.8% decline over 7 days, 16.5% decline over 30 days, 16.5% decline year to date, 39.5% decline over 1 year, 78.3% decline over 3 years and 79.3% decline over 5 years.
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These sharp moves have kept Teleperformance in focus as investors reassess both the opportunities and the risks around the business. That context is essential before you weigh up whether the current valuation makes sense for you.
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On Simply Wall St's valuation checks, Teleperformance scores 5 out of 6. We will break this down using several common valuation approaches, then finish by looking at a more complete way of thinking about value that brings all of these methods together.
Find out why Teleperformance's -39.5% return over the last year is lagging behind its peers.
Approach 1: Teleperformance Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model takes the cash Teleperformance is expected to generate in the future, then discounts those amounts back to today to estimate what the whole business might be worth in € right now.
Teleperformance's latest twelve month Free Cash Flow is €1.37b. Analysts provide detailed forecasts for the next few years, and Simply Wall St then extends those forecasts further out. On this basis, the company's Free Cash Flow projection for 2028 is €990m, with additional estimates running out to 2035 and then converted into today's money using a discount rate.
Using this 2 Stage Free Cash Flow to Equity model, the resulting estimated intrinsic value is €200.72 per share. Compared with the current share price of €52.72, the model output implies the shares trade at a 73.7% discount to that intrinsic value. This indicates a wide gap between the market price and this cash flow based estimate.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Teleperformance is undervalued by 73.7%. Track this in your watchlist or portfolio , or discover 873 more undervalued stocks based on cash flows .
Approach 2: Teleperformance Price vs Earnings (P/E)
For a profitable business like Teleperformance, the P/E ratio is a useful shorthand for how much investors are paying for each euro of current earnings. It connects directly to what the company is already earning today, which many investors find easier to anchor than long range forecasts.
What counts as a "normal" P/E depends on how the market views a company's growth potential and risk. Higher expected growth and lower perceived risk can support a higher multiple, while slower growth or higher uncertainty usually point to a lower one.
Teleperformance currently trades on a P/E of 6.37x. That sits below the Professional Services industry average of 18.14x and also below the broader peer group average of 33.78x. Simply Wall St's proprietary "Fair Ratio" for Teleperformance is 16.36x. This Fair Ratio reflects factors that simple peer or industry comparisons miss, such as the company's earnings growth profile, risk characteristics, profit margins, industry, and market capitalisation.
By comparing Teleperformance's actual P/E of 6.37x with the Fair Ratio of 16.36x, the shares screen as undervalued on this earnings based yardstick.
Result: UNDERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1426 companies where insiders are betting big on explosive growth .
Upgrade Your Decision Making: Choose your Teleperformance Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way for you to attach your own story about Teleperformance to the numbers such as your fair value, revenue, earnings and margin assumptions.
A Narrative links three things together: how you think the business story plays out, what that means for a financial forecast, and the fair value that follows from those assumptions.
On Simply Wall St, Narratives sit inside the Community page and are designed so any investor can quickly adjust a few key inputs, compare their fair value to the current share price, and decide whether Teleperformance appears more attractive, fairly priced, or expensive based on their view.
Because Narratives update automatically when new information arrives, such as fresh earnings or company news, your fair value view can stay aligned with what is happening without you rebuilding a model from scratch.
For Teleperformance, one investor might build a Narrative with a relatively high fair value based on stronger long term revenue and margin assumptions, while another might set a much lower fair value using more cautious forecasts and a higher discount rate.
Do you think there's more to the story for Teleperformance? 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.
Companies discussed in this article include TEP.PA .
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
