Is Tempus AI (TEM) Stock Price Reflecting Its Rapid 1‑Year Surge?

• If you are asking whether Tempus AI is priced attractively or already baking in a lot of optimism, the rest of this article is built to help you assess that question clearly.
• Tempus AI shares last closed at US$69.54, with returns of 15.2% over the past 7 days, an 11.5% gain year to date and a 78.9% return over the last year. The 30 day return sits at a 9.3% decline.
• Recent attention on Tempus AI has centered on its position in applying AI tools to healthcare data and its potential role in supporting clinical decision making and drug development. That broader story has helped frame the stock's moves as investors weigh how much of that opportunity is already reflected in the current price.
• Simply Wall St's valuation checks give Tempus AI a score of 3 out of 6, which means some metrics suggest the shares look cheaper while others are more cautious. Next we will walk through the main valuation methods before finishing with a more holistic way to think about what the stock might be worth.

Tempus AI delivered 78.9% returns over the last year. See how this stacks up to the rest of the Life Sciences industry.

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

A Discounted Cash Flow model takes estimates of a company’s future cash flows and discounts them back to today’s dollars, aiming to approximate what the entire business might be worth right now.

For Tempus AI, Simply Wall St uses a 2 Stage Free Cash Flow to Equity model. The latest twelve months free cash flow is a loss of about US$257.7 million. Analysts have provided near term estimates, and these are extended by Simply Wall St to longer term projections. Under this framework, free cash flow is projected to reach about US$1.1 billion in 2030, with intermediate years stepping up from low single digit millions to several hundred million dollars before moving above US$1 billion.

After discounting this stream of cash flows back to today, the estimated intrinsic value is about US$182.79 per share. Compared with the recent share price of US$69.54, the DCF output suggests the stock is around 62.0% undervalued based on these assumptions.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Tempus AI is undervalued by 62.0%. Track this in your watchlist or portfolio, or discover 877 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Tempus AI.

Approach 2: Tempus AI Price vs Sales

For a company that is still building toward consistent profitability, the price to sales, or P/S, ratio is often more useful than earnings based metrics, because it anchors valuation to current revenue rather than earnings that may be volatile or negative.

In general, higher growth potential and lower perceived risk can justify a higher P/S ratio, while slower expected growth or higher risk can argue for a lower one. So the question is not just whether a P/S looks high or low, but whether it fits the company’s profile.

Tempus AI currently trades on a P/S of 11.19x. That sits above both the Life Sciences industry average P/S of 3.70x and the peer average of 5.15x. Simply Wall St also calculates a Fair Ratio of 8.24x, which is the P/S level their model suggests based on factors like earnings growth, industry, profit margin, market cap and risk.

This Fair Ratio is more tailored than a simple peer or industry comparison, because it tries to adjust for the specific characteristics of Tempus AI rather than treating all companies as alike. Comparing the current 11.19x P/S to the 8.24x Fair Ratio indicates that the shares are trading above that model based estimate.

Result: OVERVALUED

P/S ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1448 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Tempus AI Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St’s Community page you can use Narratives to connect your own story about Tempus AI to a set of forecasts and a fair value. You can then compare that fair value to the current price and see whether your view points you toward buying, holding or selling. The platform updates your Narrative when new earnings or news arrive. You can see, for example, one investor framing Tempus AI around future oncology data partnerships and assigning a fair value of about US$88.92 per share, while a more cautious investor might anchor closer to the US$60.00 end of the analyst range, showing how different perspectives on the same business turn into different fair values.

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.

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