Assessing Santos (ASX:STO) Valuation Following Recent Share Price Decline

Santos (ASX:STO) has seen some interesting moves in its share price lately, with the stock closing at A$6.68 and recording a drop of nearly 15% over the past month. Investors may be wondering what is driving these recent shifts and how they align with the company’s fundamentals.

See our latest analysis for Santos.

While Santos has faced some turbulence lately, the stock’s 30-day share price return of -14.7% points to waning momentum compared to its longer-term trajectory. The one-year total shareholder return has also slipped slightly into negative territory. This recent pullback has investors re-assessing the balance between risk and potential upside, particularly in light of broader sector headwinds and ongoing market volatility.

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Given the recent dip and the fact that Santos now trades at a notable discount to analyst price targets, the key question is whether the stock is truly undervalued or if the market has already priced in any future growth potential.

Most Popular Narrative: 17.6% Undervalued

According to the most closely followed narrative, Santos’ estimated fair value significantly outpaces its recent closing price, hinting that the stock may be trading below what analysts believe it’s worth. The fair value estimate is based on updated long-term assumptions and takes into account recent sector developments.

Strong momentum in securing long-term, oil-linked LNG contracts, with 92% of the portfolio contracted and 80% oil-linked through 2029, enhances revenue visibility and pricing power amid ongoing geopolitical-driven energy security concerns. This supports stable and growing earnings.

Read the complete narrative.

What’s fueling these projections of higher value? Just wait until you discover the kind of future contract coverage, margin expansion, and production ramp-up embedded in the narrative’s calculations. Are you ready to see what makes these numbers tick?

Result: Fair Value of $8.10 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, there are still risks to this outlook, such as potential delays in major project ramp-ups or shifts in regulatory and environmental policies that could affect future earnings.

Find out about the key risks to this Santos narrative.

Another View: Multiples Paint a Mixed Picture

Looking through the lens of valuation multiples, Santos is trading at 13.9 times earnings, which is notably higher than both its global industry peers (12.9x) and the peer average (10.5x). However, our fair ratio analysis suggests the market could eventually price Santos as high as 15.9 times earnings. This level would imply further upside.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Santos Narrative

If you see things differently or want to dive deeper into the numbers yourself, you can build a personalized view in just minutes. Do it your way.

A great starting point for your Santos research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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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.

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