Gibson Energy (TSX:GEI) Valuation Check After Long-Term Edmonton Contracts and New Texas Growth Project

Gibson Energy (TSX:GEI) just locked in two long duration take or pay contracts at its Edmonton Terminal and greenlit a new Texas infrastructure project, tightening the visibility around its future cash flows.

See our latest analysis for Gibson Energy.

Those long term Edmonton deals and the new Texas project land against a share price of CA$25.88, with an 11.46% 1 month share price return and a 5 year total shareholder return of 66.92%, suggesting quietly building momentum as the market reassesses Gibson Energy’s contracted cash flow story.

If this kind of contracted growth has you thinking more broadly about infrastructure linked plays, it could be a good moment to discover fast growing stocks with high insider ownership

With long term contracts locked in and a fresh Texas growth project underway, is Gibson Energy’s intrinsic value still underappreciated at today’s price, or is the market already baking in the next leg of growth?

Most Popular Narrative Narrative: 1% Overvalued

Compared with the CA$25.88 last close, the most followed narrative puts Gibson Energy’s fair value only marginally lower, which implies the current rally is largely accounted for.

The analysts have a consensus price target of CA$26.423 for Gibson Energy based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$30.5, and the most bearish reporting a price target of just CA$24.0.

Read the complete narrative.

Want to see what kind of earnings jump and margin reset are incorporated into this view, and why the future multiple needs to step down sharply? Dive in.

Result: Fair Value of $25.62 (OVERVALUED)

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

However, a faster energy transition or weaker contract renewals at key terminals could undermine volume growth, squeeze margins, and challenge the current fair value narrative.

Find out about the key risks to this Gibson Energy narrative.

Another View: Cash Flows Tell a Different Story

While the consensus narrative nudges Gibson Energy into slightly overvalued territory on earnings based metrics, our DCF model points the other way, suggesting fair value closer to CA$62.29, around 58% above today’s price. Is the market underestimating the durability of these contracted cash flows?

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 Gibson Energy 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 908 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 Gibson Energy Narrative

If you see the story differently, or simply want to test your own assumptions against the numbers, you can build a custom view in just a few minutes: Do it your way

A great starting point for your Gibson Energy research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

Ready for more high conviction ideas?

Do not stop at a single opportunity. Use the Simply Wall Street Screener to uncover fresh stocks that fit your strategy before the market catches on.

• Capitalize on smaller companies breaking out of obscurity by scanning these 3574 penny stocks with strong financials for overlooked names with serious upside potential.
• Ride structural shifts in healthcare by targeting innovation leaders through these 30 healthcare AI stocks, where data driven medicine meets scalable business models.
• Lock in income potential and reinvestment power by focusing on these 15 dividend stocks with yields > 3% that can strengthen total returns over time.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com