Is There Still Opportunity in Pembina Pipeline After Recent 8.6% Price Surge?

Trying to figure out what’s next for Pembina Pipeline? You’re definitely not alone. Whether you’re weighing a first buy or assessing your next move, the current situation deserves a closer look. This isn’t a stock that’s just been sitting still. Over the last five years, Pembina’s price has surged 164.5%, and even in the last month alone, it’s gained 8.6%. The steady climb has attracted attention, partly thanks to shifting energy market dynamics as North American infrastructure operators gain renewed investor confidence.

This run hasn’t been a straight line, of course. Shorter-term returns have been positive too: up 1.5% this past week and 6.8% year-to-date. Last year, Pembina gained 4.3%, showing some resilience even while the sector navigated commodity price swings and evolving regulation. Some of these gains mirror sector-wide optimism, but Pembina’s particular mix of stability and ambition has also helped it stand out in investor portfolios.

But with prices above $57 and a long history of strong gains, the obvious question is: is Pembina still undervalued or has it already run its course? According to our scoring, Pembina checks the box on 3 out of 6 standard valuation metrics, earning it a value score of 3. That’s a promising start, but of course, surface-level numbers only tell part of the story.

Next, we’ll dig deeper into how those valuation checks stack up and explore how conventional metrics might be missing something even more telling about Pembina’s future value.

Why Pembina Pipeline is lagging behind its peers

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

A Discounted Cash Flow (DCF) model aims to estimate the value of a company by projecting its future cash flows and then discounting those amounts back to today’s value. This process helps reveal whether a stock is trading at a price that makes sense given its future potential.

For Pembina Pipeline, the DCF calculation uses a 2 Stage Free Cash Flow to Equity model. The company’s latest twelve-month free cash flow stands at CA$2.67 billion. Analyst estimates suggest free cash flow will continue to grow, potentially reaching CA$3.01 billion by 2029. After the first few years of visible analyst forecasts, the model extends projections further out to 2035. These years are extrapolated based on reasonable long-term assumptions.

Based on these forward-looking cash flows, the DCF model values Pembina at approximately CA$131.63 per share. With the current market price just above CA$57, this implies the stock is trading at a significant 56.6% discount to its estimated intrinsic value. This sizable disconnect suggests the market may be underestimating Pembina’s long-term earning potential and cash generation power.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Pembina Pipeline is undervalued by 56.6%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Pembina Pipeline Price vs Earnings

For profitable companies like Pembina Pipeline, the Price-to-Earnings (PE) ratio is often viewed as a go-to valuation measure. That is because it shows how much investors are paying for each dollar of current earnings, a helpful benchmark for comparing stocks of established businesses generating meaningful profit.

The "right" or "fair" PE ratio can vary significantly based on market expectations for future growth and perceived risks. Higher expected earnings growth usually justifies a higher PE, while elevated risks or weak outlooks tend to push fair multiples lower. Context matters, so peer and industry benchmarks are useful, but only to a point.

Pembina Pipeline is currently trading at a PE of 19.2x. For comparison, its direct peers average 20.7x, and the broader Oil and Gas industry averages 12.4x. This puts Pembina’s valuation above the sector benchmark but slightly lower than the group of similar companies.

Simply Wall St’s proprietary "Fair Ratio" provides a more tailored view, incorporating not just peer and industry levels, but also Pembina's specific growth prospects, profit margins, market size, and risk profile. For Pembina, the Fair Ratio comes in at 16.0x, a more precise estimate of what the market should pay for its earnings given all these factors. This approach arguably leads to a better assessment than comparisons using a broad industry or peer set alone.

Comparing the Fair Ratio with the current PE, Pembina’s 19.2x is moderately above the 16.0x fair value, suggesting its shares are somewhat overvalued on an earnings basis at present.

Result: OVERVALUED

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

Upgrade Your Decision Making: Choose your Pembina Pipeline Narrative

Earlier, we mentioned there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple yet powerful tool that brings your investment ideas to life by letting you connect the company's story, your expectations for growth, margins, and fair value, with the numbers that drive its future.

Narratives link the why behind a company's outlook to real forecasts and translate that story into a clear fair value, helping you move from guesswork to structured decision-making. On Simply Wall St’s Community page, investors can easily create and compare Narratives, seeing how their assumptions stack up against millions of others. By comparing each Narrative’s Fair Value with the current Price, you get a dynamic read on when it might be smart to buy or sell. Every Narrative automatically updates as new information, news, or earnings releases come in.

For example, some investors project Pembina’s diversified expansions and resilient margins will justify a fair value close to CA$64 per share, while others worry about regulatory risks and forecast a much lower value around CA$48. Narratives make these perspectives and the numbers behind them easy to compare, so you’re never just guessing.

Do you think there's more to the story for Pembina Pipeline? Create your own Narrative to let the Community know!

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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