Is Pembina Pipeline Still Attractive After Recent Infrastructure Expansion and Regulatory Developments?

• Wondering if Pembina Pipeline is still a smart buy at today’s price, or if most of the upside has already been baked in? Let us unpack what the market is really paying for here.
• The stock has drifted slightly lower in the short term, down 2.8% over the last week and 2.5% over the last month. It is still up 5.4% over the past year, 39.0% over three years, and 130.4% over five years, which hints at a long runway of value creation despite recent softness.
• Recent headlines have focused on Pembina’s ongoing investment in Western Canadian midstream infrastructure and incremental capacity expansions that aim to capture long term demand for oil and gas transport and processing. Investors have also been watching regulatory developments and strategic partnership announcements that could reshape future growth projects and risk sharing across the network.
• On our framework, Pembina scores a 3 out of 6 on key undervaluation checks. This suggests the stock is not a screaming bargain but may still offer pockets of mispricing. In the sections ahead we will walk through different valuation lenses, then finish with a more holistic way to judge what the market might be missing.

Find out why Pembina Pipeline's 5.4% return over the last year is lagging behind its peers.

Approach 1: Pembina Pipeline Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth today by projecting its future cash flows and then discounting them back to a present value. For Pembina Pipeline, this 2 Stage Free Cash Flow to Equity model starts with last twelve month Free Cash Flow of about CA$2.5 billion and uses analyst forecasts for the next several years, then extrapolates further into the future.

Analysts see Free Cash Flow rising to roughly CA$3.0 billion by 2029, with Simply Wall St extending those projections out to 2035 using gradually slowing growth assumptions. All of those future cash flows are discounted back to today, producing an estimated intrinsic value of around CA$159.04 per share.

That implies the shares are trading at a roughly 66.7% discount to this DCF estimate, suggesting the market is pricing in much weaker long term cash generation or higher risk than the model assumes.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Pembina Pipeline is undervalued by 66.7%. Track this in your watchlist or portfolio, or discover 913 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Pembina Pipeline.

Approach 2: Pembina Pipeline Price vs Earnings

For profitable, established businesses like Pembina Pipeline, the price to earnings ratio is a useful snapshot of how much investors are willing to pay for each dollar of current earnings. It naturally ties today’s share price to the company’s profitability, which is especially relevant for mature, dividend paying infrastructure names.

What counts as a normal or fair PE depends on how quickly earnings are expected to grow and how risky those earnings are. Higher growth and lower risk usually justify a higher multiple, while slower or more volatile earnings should trade on a discount. Pembina currently trades on about 18.9x earnings, above the Oil and Gas industry average of roughly 14.8x, but slightly below its broader peer group at around 21.7x.

Simply Wall St’s Fair Ratio framework estimates that, considering Pembina’s growth profile, margins, industry positioning, market cap and risk factors, a PE of about 17.8x would be appropriate. This tailored benchmark is more informative than blunt peer or sector comparisons because it adjusts for company specific strengths and weaknesses. With the actual PE just modestly above this Fair Ratio, Pembina appears somewhat fully valued on earnings, but not excessively priced.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1455 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Pembina Pipeline Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of Pembina Pipeline’s story with a concrete forecast and Fair Value estimate on Simply Wall St’s Community page. There you can define assumptions for revenue, earnings and margins, see how that translates into a Fair Value, compare it to today’s share price to decide whether to buy, hold or sell, and have that view automatically update as new news or earnings arrive. For example, one investor might build a bullish Pembina Narrative around long term LNG exports, resilient 24 percent plus margins and a Fair Value near CA$64.0. A more cautious investor could focus on project risk, toll resets and regulatory headwinds that point to a Fair Value closer to CA$48.0, with both perspectives clearly quantified and tracked over time.

Do you think there's more to the story for Pembina Pipeline? Head over to our Community to see what others are saying!

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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