TMC the metals (TMC) has moved back into focus after signing a commercial agreement with Allseas to build and operate a 3.0 million wet tonnes per year nodule collection system in the Clarion Clipperton Zone.

The recent Allseas agreement and NOAA compliance milestone come after a powerful run, with TMC’s 1 year total shareholder return of 88.63% and a very large 3 year total shareholder return. This comes even as the year to date share price return is down 16.81% at a latest share price of US$5.64, suggesting momentum has cooled in the short term.

If this deep sea minerals story has your attention, it could be worth seeing what else is moving in resource related plays through the 33 best rare earth metal stocks.

With the stock up 88.63% over 1 year but down 16.81% year to date and trading at about half of one analyst price target, you have to ask: is there still a buying opportunity here, or is future growth already priced in?

Most Popular Narrative: 49.6% Undervalued

At a last close of $5.64 versus a narrative fair value of $11.20, the widely followed TMC story pencils in a large valuation gap based on future cash generation and permitting milestones.

The pre feasibility study and initial assessment outline a large resource with an estimated combined NPV of US$23.6b, targeted steady state revenue of about US$600 per dry ton and an EBITDA margin per ton of roughly 43%. If the company moves closer to these project economics while remaining in the first quartile of the cost curve, that cost position could support resilient margins and long term EBITDA and earnings power.

Want to see what has to go right for that kind of NPV and margin profile to line up with today’s price? The core of this narrative leans on a sharp swing from current losses to sizeable earnings, plus a future valuation multiple more often associated with higher growth sectors. Curious which specific revenue build up, margin path and earnings timeline are being penciled in to justify an $11.20 fair value?

Result: Fair Value of $11.20 (UNDERVALUED)

However, this hinges on securing a NOAA Commercial Recovery Permit on workable terms and avoiding cost or recovery setbacks that would challenge the US$23.6b NPV assumptions.

Next Steps

If this story leaves you torn between the upside case and the risks, take the time to look through the details yourself and decide quickly. A good place to start is by weighing the 2 key rewards and 5 important warning signs.

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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.