• This article walks through key valuation numbers for Tempus AI so you can consider whether the current share price reflects its underlying value.
• The stock has had a mixed run lately, with a 10.9% drop over the last 7 days, a 5.6% gain over the last 30 days, and a 20.7% decline year to date, leaving the 1-year return at 24.2% in the red.
• Recent attention around Tempus AI has focused on its position within healthcare AI and how investors are weighing growth ambitions against execution risk. This backdrop helps explain why the share price has been volatile as the market reassesses what it is willing to pay for that story.
• On Simply Wall St's valuation checks, Tempus AI scores 3 out of 6. The rest of this article will break down what that means using several valuation approaches and then finish with a broader way to think about value beyond a single score.

Approach 1: Tempus AI Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes forecasts of a company’s future cash flows and discounts them back to today using a required rate of return, aiming to estimate what those future dollars are worth in today’s terms.

For Tempus AI, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is a loss of $225.6 million. Analysts provide explicit free cash flow estimates out to 2030, with projected free cash flow of $536.1 million in that year. Beyond the first five years, Simply Wall St extrapolates the projections rather than relying on additional analyst estimates.

After discounting the projected cash flows, the DCF model arrives at an estimated intrinsic value of $108.52 per share. This implies the stock trades at a 54.5% discount to that estimate, which points to Tempus AI being significantly undervalued on this cash flow view.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Tempus AI is undervalued by 54.5%. Track this in your watchlist or portfolio, or discover 51 more high quality undervalued stocks.

Approach 2: Tempus AI Price vs Sales

For companies that are not yet profitable, P/S is often the most practical valuation yardstick because it compares what the market is paying to the revenue being generated rather than to earnings that may still be negative.

In general, higher growth expectations and lower perceived risk can support a higher “normal” P/S multiple, while slower growth and higher risk usually point to a lower multiple. So context around the business model and balance of risks matters when you look at any single ratio.

Tempus AI currently trades on a P/S of 6.51x, compared with the Life Sciences industry average of 3.45x and a peer average of 4.03x. Simply Wall St also calculates a “Fair Ratio” of 6.81x for Tempus AI, which is the P/S level suggested by factors such as its growth profile, profit margins, industry and market cap, as well as company specific risks.

This Fair Ratio is more tailored than a simple industry or peer comparison because it adjusts for those business characteristics rather than assuming all companies deserve the same multiple. Here, the current P/S of 6.51x sits only slightly below the Fair Ratio of 6.81x, which suggests the stock is broadly in line with that model.

Result: ABOUT RIGHT

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Upgrade Your Decision Making: Choose your Tempus AI Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you attach a clear story to your numbers by linking a company’s business drivers to your own revenue, earnings and margin assumptions. This turns those assumptions into a fair value that you can quickly compare with the current share price on the Community page where millions of investors share views. For Tempus AI, that might mean one investor builds a bullish Narrative around a US$105.0 fair value with faster revenue growth and a higher future P/E, while another builds a cautious Narrative around a US$58.0 fair value with slower growth and a lower assumed multiple. Both Narratives then update as new news or earnings are incorporated so you can see in real time whether your story still supports buying, holding or selling at today’s price.

Do you think there's more to the story for Tempus AI? 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.