Is Transurban's (ASX:TCL) share price 18% undervalued?

Why a 'return to normal' should see Transurban's share price gain 18% from today's levels. And it could gain far more…

| More on:
green road sign with white up arrow representing rising atlas arteria share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Transurban Group (ASX: TCL) share price was down 0.5% at close of trade today.

That's broadly in line with the wider market moves, which saw the S&P/ASX 200 Index (ASX: XJO) fall 0.3% by the closing bell.

Still, October's been a good month for Transurban shareholders, with the share price up 6.2% so far this month. Following the massive COVID-19 driven sell-off in March, year-to-date the share price remains down 6.5%. 

So why do I think the Transurban share price is undervalued by at least 18%? We'll get to that in a tick. But first…

What does Transurban do?

Transurban is one of the world's largest toll road operators. Atop collecting toll payments from road users, the company also designs and constructs new road projects. Transurban is Australian-owned and operates in Melbourne, Sydney and Brisbane. It also runs toll roads in Montreal, Canada and the wider Washington DC area in the United States.

Transurban first listed on the ASX in 1996.

Why the Transurban share price could go up

Less than 8 months ago, on 20 February, the Transurban share price hit an all-time closing high of $16.26 per share.

That's just over 14% above today's price of $13.93 per share. This means if things were simply to 'return to normal' the share price could gain 18%.

And traffic counts on the company's toll roads indicate that the return to normal is already well under way.

At last week's annual general meeting (AGM), the company revealed that while average daily traffic (ADT) was still down 58.6% on its Melbourne tollways for the September quarter, traffic numbers in Sydney were up 1.5%.

That's not huge. But it does indicate that once restrictions are lifted, people are prone to return to their cars. And with angst over potential infections on public transport likely to linger in Australia and North America, car travel should see a boost from people turning away from buses and trains.

Then there's the multi billions of dollars in the recovery budgets that the Australian, US, and Canadian governments have pledged for infrastructure (including roads) projects. This should also offer long term gains for Transurban's road design and construction branches.

Connecting the dots, I believe Transurban's share price could be at least 18% higher by this time next year.

Should you invest $1,000 in Commonwealth Bank Of Australia right now?

Before you buy Commonwealth Bank Of Australia shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Commonwealth Bank Of Australia wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A neon sign says 'Top Ten'.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a rough trading day for ASX stocks this Monday.

Read more »

A bland looking man in a brown suit opens his jacket to reveal a red and gold superhero dollar symbol on his chest.
Broker Notes

Bell Potter names more of the best ASX 200 stocks to buy in May

These stocks could be best buys this month according to the broker.

Read more »

A financial expert or broker looks worried as he checks out a graph showing market volatility.
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these shares.

Read more »

Oil worker using a smartphone in front of an oil rig.
Energy Shares

ASX 200 energy shares plunge on shock OPEC move

ASX 200 energy shares like Woodside and Santos are tumbling on Monday. Let’s find out why.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Share Gainers

Why 4DMedical, Gold Road, Syrah, and Tyro shares are racing higher today

These shares are starting the week strongly. But why?

Read more »

Rising gold share price represented by a green arrow on piles of gold block.
Gold

2 ASX gold stocks racing higher in Monday's sinking market

Investors are sending these ASX gold stocks flying higher on Monday. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Brainchip, Helia Group, Reliance Worldwide, and Westpac shares are dropping today

These shares are starting the week in the red. But why?

Read more »

Man looking upwards contemplating which shares to buy
Broker Notes

CSL shares have climbed 10% since 11 April. Is it too late to buy?

What are analysts saying about this biotech giant after its recent rally? Let's find out.

Read more »