TC Energy (TSX:TRP) shares have slipped about 1% over the past day, continuing a slide that has now stretched for most of the month. Investors are watching how the stock responds, given TC Energy’s longer-term return track record.
While TC Energy’s share price has been under pressure this month, momentum over the longer run is clear. Its one-year total shareholder return sits at 14.24%, with five-year total returns nearly doubling investor capital. The latest dip has some investors watching closely for a possible shift in sentiment or just a pause before the next move.
With TC Energy boasting steady returns and trading at a modest discount to analyst targets, the big question is whether the recent pullback signals an undervalued opportunity or if future growth is already accounted for in the price.
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Most Popular Narrative: 6.9% Undervalued
TC Energy’s most widely followed valuation narrative suggests fair value is moderately above the last close, hinting at a small but meaningful disconnect investors may be watching closely.
Market optimism around new project announcements and sanctioned capacity additions may be ignoring structural risks from stricter climate policies and possible future carbon pricing. These risks could increase regulatory costs and compress net margins for pipeline operators like TC Energy. There is excessive confidence in the long-term stability of rate-regulated or take-or-pay contracts. However, longer-term secular shifts toward decarbonization and capital flight from fossil fuel infrastructure could result in lower asset utilization and impair TC Energy's ability to renew or replace contracts at current terms, impacting revenues and earnings stability.
Curious which potentially game-changing trends and profit assumptions are baked into the price? The narrative is built around bold expectations for future margins, top-line growth, and a premium profit multiple. These figures rival some market leaders. Can TC Energy really live up to these bullish forecasts, or is the story headed for a plot twist? Find out what’s driving the fair value call.
However, strong North American gas demand or successful project execution could quickly shift expectations and challenge the view that further upside is limited.
Looking at market ratios, TC Energy trades at 17.2 times earnings, making it pricier than the Canadian Oil and Gas industry’s average of 12.2 times. Compared to its peer average of 19.1, it is more affordable, yet the so-called fair ratio is 15.9, suggesting investors might be paying a slight premium. Do these numbers hint at a hidden risk or a unique opportunity for the stock’s future?
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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.
Valuation is complex, but we're here to simplify it.
Discover if TC Energy might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
