ARC Resources (TSX:ARX): Assessing Valuation After Announcing a Major Share Buyback Program

ARC Resources (TSX:ARX) just made headlines by announcing a new share repurchase program, planning to buy back almost 10% of its outstanding shares by next September. This decision from the board signals a clear intention to return capital to shareholders and suggests management's confidence in ARC’s long-term prospects. Whenever a company moves forward with such a large buyback, it tends to raise eyebrows among investors who want to know whether this is simply good capital management or a sign that shares are trading at an attractive price. Taking a step back, ARC Resources has had a mixed run this year. The stock is up 18% over the past twelve months, yet it is down about 13% over the past three months and more than 6% in the month, pointing to some recent loss of momentum after a stretch of strong multi-year gains. That context makes this repurchase decision even more relevant for valuation-focused investors, especially against a backdrop where the company’s annual earnings and revenues are still growing. With ARC’s buyback adding a new wrinkle to the recent price action, investors may wonder whether this move signals that shares are undervalued or if the market has already priced in stronger performance ahead.

Most Popular Narrative: 25.1% Undervalued

Based on the most widely followed narrative, ARC Resources is considered significantly undervalued, with a consensus that its fair value sits well above current trading levels. This perspective relies on analyst expectations around future earnings, profit margins, and operational upside.

Early investments in pipeline and transportation infrastructure, along with long-term marketing contracts accessing premium-priced North American and international markets, enable ARC to outperform local price benchmarks and support stronger, more resilient revenues through commodity cycles.

Want to uncover why top analysts see so much upside? They are betting on a combination of smart capital moves and potential cash flow growth that could surpass peers' expectations. Wonder which earnings levers and critical margin boosts define their valuation math? The details behind this bold target might surprise you.

Result: Fair Value of $33.94 (UNDERVALUED)

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

However, risks such as rising costs or slower-than-expected LNG demand could challenge the upbeat outlook and put pressure on ARC’s expected profitability.

Find out about the key risks to this ARC Resources narrative.

Another View: Our DCF Model’s Take

Looking through the lens of our SWS DCF model, ARC Resources appears undervalued and this supports the earlier case from the analyst narratives. However, every model has its blind spots. Could a different approach reveal something we are missing?

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 ARC Resources 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 ARC Resources Narrative

If you see things differently or want to dig into the numbers on your own terms, you can build your own outlook in just a few minutes by using Do it your way.

A great starting point for your ARC Resources research is our analysis highlighting 5 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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