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Temenos (SWX:TEMN) shares have delivered a 19% gain over the past month, outpacing many in the European software space. Investors are starting to evaluate what is currently driving this momentum and are assessing possible next steps.

See our latest analysis for Temenos.

After a strong 30-day share price return of 18.7%, Temenos is gathering momentum and adding to its 28.8% total shareholder return over the past year. The recent uptrend suggests investors are warming to the company’s prospects following prior volatility and mixed longer-term results.

If Temenos’ bounce has you thinking about future opportunities, consider broadening your search and discover fast growing stocks with high insider ownership

With Temenos’ strong run in recent weeks, investors are now faced with a pressing question: is the stock still undervalued, or has the market already factored in its expected growth, leaving little room for upside?

Temenos currently trades at a price-to-earnings (P/E) ratio of 20.9x, which is well below the European software peer average of 39.3x and the broader software industry average of 27x. With a last close of CHF75.55, this places TEMN at a relative valuation discount, signaling that investors may still be underappreciating its market position and recent performance gains.

The price-to-earnings ratio expresses how much investors are willing to pay for each franc of earnings. In software, a sector often characterized by high margins and strong profit growth, P/E multiples tend to run higher than other industries. A lower P/E at Temenos’ current level suggests the market is cautious, possibly due to past volatility or concerns about future earnings and growth rates.

Compared to both peers and the industry, Temenos’ 20.9x stands out as a bargain. Not only is it significantly beneath the European average for software companies, but it is also comfortably below the sector norm. This could indicate untapped upside if confidence continues to rebound, but also suggests the market is demanding more proof before assigning a premium multiple.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-Earnings of 20.9x (UNDERVALUED)

However, slower annual revenue growth and a recent decline in net income highlight lingering concerns that could challenge the case for continued upward momentum.

Find out about the key risks to this Temenos narrative.

While Temenos’ price-to-earnings ratio indicates the shares could offer good value, our DCF model tells a different story. According to the SWS DCF model, Temenos is trading just above its estimated fair value of CHF75.04. This suggests there may be limited upside in the current price. Should investors be cautious about further gains, or could sentiment continue to drive the stock higher?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Temenos for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 881 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.

If you have a different perspective or enjoy hands-on research, you can quickly develop and test your own investment thesis in just a few minutes with Do it your way

A great starting point for your Temenos research is our analysis highlighting 3 key rewards and 4 important warning signs that could impact your investment decision.

Take the next step and expand your investing toolkit by targeting stocks with traits that match your own strategy. Miss out, and you could overlook tomorrow’s standouts.

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 TEMN.SW.

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