APA Group (ASX:APA) Valuation in Focus After Sharp Drop in Full-Year Profit

If you caught the headlines about APA Group (ASX:APA) releasing its full-year financial results, you might be weighing your next move. The company posted a sharp drop in net income for the year ended June 30, 2025, falling to AUD 129 million from AUD 998 million twelve months prior. That kind of shift tends to get investors talking, especially for a business as closely watched as APA, given its role in Australia’s energy infrastructure. Although revenue showed a modest increase, the change in profitability can quickly shift the outlook conversation.

APA’s share price has climbed around 25% this year, signaling that some investors still see opportunities despite the lower profits. Momentum has also increased over the past month, following a steady period. Alongside today’s earnings release, the group is proposing constitutional amendments, but the earnings decline remains the main driver of market attention. Long-term holders may observe that three- and five-year returns have lagged, which adds a note of caution to recent optimism.

Is the current price factoring in future recovery, or is the market overlooking risks after this year’s earnings surprise? Here is a closer look at how the numbers stack up from a valuation perspective.

Most Popular Narrative: 6% Overvalued

According to community narrative, APA Group is viewed as overvalued by roughly 6% when measured against a consensus of analyst projections and risk factors.

Key future projects, such as those identified within the $1.8 billion organic growth pipeline, focus on contracted power generation and expansion of the gas transmission and storage network. These projects have the potential to boost revenues and generate healthy return margins above APA’s post-tax WACC.

Consider future infrastructure developments, rising demand, and strong margins. What supports this valuation? There is a significant emphasis on future profit and sales expectations, as well as a financial metric that may be unexpected. Interested in what is driving the premium? The full narrative explores the growth story and the central figures in this analyst outlook.

Result: Fair Value of $8.25 (OVERVALUED)

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

However, ongoing regulatory changes and higher borrowing costs could present challenges to these optimistic forecasts. This situation may potentially delay revenue growth and put pressure on margins.

Find out about the key risks to this APA Group narrative.

Another View: DCF Analysis Challenges the Market Premium

While analyst consensus sees APA Group as overvalued against profit and risk metrics, the SWS DCF model offers a different perspective. According to this model, the stock could actually be undervalued. Which method do you trust more?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out APA Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own APA Group Narrative

If you have a different perspective or prefer to dig into the data firsthand, you can start building your own story about APA Group in just a few minutes, or simply do it your way.

A great starting point for your APA Group research is our analysis highlighting 2 key rewards and 2 important warning signs 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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