TMC the metals (TMC) has drawn fresh investor focus after signing a detailed development and commercial production agreement with Allseas to build and operate what the company expects will be the first commercial nodule collection system.

The Allseas agreement and recent Q1 update come against a mixed price backdrop, with the 1 day share price return of 1.8% contrasting with share price returns that are down around 10% over the past month and quarter, even as the 1 year total shareholder return is positive and the 3 year total shareholder return is very large. This suggests long term holders have already seen substantial swings in sentiment.

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With TMC reporting ongoing losses, a very large 3 year total shareholder return and trading at a discount to a US$11.00 analyst price target, you have to ask: is there still upside, or is the market already pricing in future growth?

Most Popular Narrative: 54.5% Undervalued

Analysts following the most popular narrative see fair value at $11.20 compared with the last close at $5.10, which explains the very wide gap to current trading.

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 how those project economics translate into a much higher fair value than today’s price? The narrative leans on sharp revenue scaling, improving margins and a future earnings multiple that is usually associated with fast growing sectors, not early stage resource projects.

Result: Fair Value of $11.20 (UNDERVALUED)

However, this hinges on TMC securing a NOAA Commercial Recovery Permit, and on keeping cash burn, funding needs and any environmental constraints from materially reshaping those projected economics.

Next Steps

With sentiment clearly split between risks and rewards, it makes sense to move quickly and weigh the evidence for yourself using our breakdown of 2 key rewards and 6 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.