NextDecade (NEXT): Evaluating Valuation After Major Project Decision and Insider Investment

NextDecade (NEXT) just turned heads with a one-two punch of news that is bound to get investors talking. The company made a positive final investment decision for Train 4 of its Rio Grande LNG project, effectively locking in fresh financial commitments for expansion. At the same time, Hanwha Aerospace, a ten percent owner, doubled down on its stake with roughly $7 million in share purchases. With a major shareholder reinforcing its position and a transformative project milestone achieved, this week’s announcements put NextDecade’s long-term strategy in the spotlight.

These moves come during an eventful stretch for the stock. After a rough month and quarter, with the stock down 34% over the past month and 21% over the past three months, NextDecade has still delivered a 47% return for shareholders over the last year and a remarkable 144% over five years. The recent selloff suggests the market is recalibrating expectations, especially after a Morgan Stanley downgrade flagged concerns about near-term cash flow. Still, significant project progress and insider buying often signal internal conviction about future value.

With all the recent ups and downs, a key question is whether the latest pullback presents a potential opportunity, or if the market has already accounted for NextDecade’s growth ambitions.

Price-to-Book of 7.1x: Is it justified?

NextDecade currently trades at a Price-To-Book Ratio of 7.1x, which is significantly higher than the average for its peers in the oil and gas sector.

The price-to-book ratio compares a company's market value to its book value. This provides insight into how investors value the underlying net assets. In capital-intensive industries like energy, this metric helps assess whether growth potential or intangible assets are driving up valuations.

Such a premium indicates that the market is either betting strongly on NextDecade’s future prospects or possibly overlooking the company’s unprofitability and cash flow concerns. If future growth does not materialize as expected, this elevated multiple may be hard to sustain.

Result: Fair Value of $1.59 (OVERVALUED)

See our latest analysis for NextDecade.

However, ongoing unprofitability and negative cash flow growth could challenge investor confidence if near-term execution on projects does not meet expectations.

Find out about the key risks to this NextDecade narrative.

Another View: What Does the SWS DCF Model Say?

Switching gears, the SWS DCF model also points to NextDecade being overvalued at current prices. While this approach looks ahead at projected cash flows, it reaches a similar conclusion as the earlier valuation based on net assets. Does this consensus reinforce caution, or is the market seeing something all the models are missing?

Look into how the SWS DCF model arrives at its fair value.

Stay updated when valuation signals shift by adding NextDecade to your watchlist or portfolio. Alternatively, explore our screener to discover other companies that fit your criteria.

Build Your Own NextDecade Narrative

If you see the story differently or want to dig into the numbers yourself, you can put together your own outlook in just a few minutes, and 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.

Looking for More Investment Ideas?

Step up your investing game by checking out unique opportunities you might be missing elsewhere. The right screener could lead you to your next smart move.

• Boost your search for market mispricings and uncover value gems with our tool for undervalued stocks based on cash flows.
• Pinpoint tomorrow's tech disruptors working in quantum computing by using the screener for quantum computing stocks.
• Unlock income potential by scouting out companies that pay above-average yields through our leading engine for dividend stocks with yields > 3%.

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