NextDecade (NEXT): Evaluating the Price-to-Book Premium in Light of Recent Share Performance

NextDecade (NEXT) shares have slipped roughly 2% over the past week and are down 45% in the past 3 months. This reflects a cautious mood among investors as the market continues to digest the company’s financial results and growth outlook.

See our latest analysis for NextDecade.

NextDecade’s share price return tells a story of fading momentum, with the stock sliding 31.2% year-to-date. While its five-year total shareholder return of nearly 138% remains impressive, recent performance reflects market hesitation about near-term growth and risk.

If you’re watching sector momentum shift and want to broaden your investing outlook, now could be the perfect time to discover fast growing stocks with high insider ownership

With shares lagging despite a still robust long-term return, the question now is whether NextDecade’s recent price weakness reflects an undervalued opportunity or if the market is already taking future growth prospects into account.

Price-to-Book of 9.8x: Is it justified?

NextDecade’s stock trades at a steep premium to its industry based on a price-to-book ratio of 9.8x, far above the US Oil and Gas average. At a last close of $5.71, investors are clearly paying up, and the question is whether this valuation can be defended amid losses and unprofitability.

The price-to-book ratio compares the company’s market value to its net assets. This provides a quick gauge of whether a stock is undervalued or overvalued relative to its balance sheet. In capital-intensive industries like energy, a high price-to-book may suggest the market believes in strong future value creation. For NextDecade, profitability remains a hurdle.

NextDecade’s premium valuation is hard to overlook. Its 9.8x ratio is significantly higher than both the industry average of 1.3x and the peer average of 1.6x. This signals that the market anticipates a significant turnaround or growth not yet seen in current results. However, there is insufficient data to determine what a fair price-to-book level should be for the company. This means much of this valuation is based on speculative expectations rather than established benchmarks.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-Book of 9.8x (OVERVALUED)

However, negative annual net income growth and continued losses remain significant risks. These factors could undermine the optimism priced into NextDecade shares.

Find out about the key risks to this NextDecade narrative.

Another View: Discounted Cash Flow Paints a Harsher Picture

Looking at NextDecade through the lens of the SWS DCF model offers a different perspective. This approach estimates the company's value based on expected future cash flows, and in this case, it suggests the shares are overvalued relative to fair value. Does this mean the recent premium is all speculation, or is the market seeing something the models do not?

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 NextDecade 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 927 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 NextDecade Narrative

If you see the numbers differently or want to shape your own conclusions, you can dig into the details and craft your perspective in just a few minutes. Do it your way.

A great starting point for your NextDecade research is our analysis highlighting 1 key reward and 4 important warning signs 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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