Viper Energy (VNOM) Margin Decline Reinforces Concerns Over Slowing Growth and High Valuation

Viper Energy (VNOM) reported revenue growth forecasted at 19.65% per year, outpacing the US market’s expected 10.5% annual rate. However, net profit margins slipped to 21.4%, down from 26% last year. Recent annual earnings growth of 19% trails its impressive five-year average of 53.9%. Although earnings are still expected to grow, the anticipated 2% annual rate is set to lag behind the wider US market forecast of 16% per year. Analysts are weighing consistent revenue and earnings progress against signs of slowing momentum and tighter margins.

See our full analysis for Viper Energy.

The next section breaks down how these headline results line up with the prevailing narratives in the market, highlighting where the numbers back up the common stories and where there may be surprises.

See what the community is saying about Viper Energy

Analyst Price Target at 50.94 vs. $36.70 Market Price

• With Viper Energy's current share price at $36.70, analysts' consensus price target stands higher at $50.94, implying an upside of more than 38% from where shares trade today.
• This analysts' consensus view highlights that, despite margin shrinkage and an expected earnings slowdown, the company’s scale advantages and integration of automation from the Sitio Royalties acquisition could drive efficiency and competitive returns.
  • Consensus emphasizes that even with earnings projected to decline from $371.2 million today to $293.3 million by September 2028, operational leverage from acquisitions and a strong focus on U.S. energy assets could support continued growth and shareholder payouts.
  • The gap between the current PE ratio (25.3x) and the required future PE (88.2x) for the target price suggests upside depends on heavy long-term confidence in revenue growth and margin recovery.

Analysts see more upside than current pricing suggests. Big catalysts or risks could shift sentiment. Read the full Consensus Narrative for Viper Energy: 📊 Read the full Viper Energy Consensus Narrative.

Margins Under Pressure; Profit to Drop by $77.9M

• Profit margins are expected to contract sharply from 39.8% today to just 12.7% in 3 years, with annual earnings forecast to fall from $371.2 million to $293.3 million by 2028.
• Analysts' consensus view calls out several pressure points for future profitability:
  • Consistent revenue growth and strategic buybacks may offset some margin compression, but persistent cost pressures, integration risks, and shrinking per-share profit could limit upside.
  • Bears may argue that dependence on successful synergy realization from acquisitions leaves little room for error, while analysts caution that high future valuation multiples are only justified if operational efficiency actually boosts margins over time.

Trading at a 25.3x PE; Rich vs. Peers, Discounted to Fair Value

• Viper Energy’s price-to-earnings ratio of 25.3x sits well above both the US oil and gas industry average (12.8x) and its peer group (18.8x), but remains far below its DCF fair value of $132.47 per share.
• Analysts' consensus view highlights that the company’s current premium reflects faith in its unique growth catalysts and future margin recovery:
  • Trading below DCF fair value and below the $50.94 target, while still commanding a high sector premium, shows the market expects accretive deals and cash returns to fuel outperformance.
  • If growth lags or cost controls fall short, the lofty valuation may become difficult to justify, especially if the industry mean reverts or analyst optimism fades.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Viper Energy on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your Viper Energy research is our analysis highlighting 4 key rewards and 3 important warning signs that could impact your investment decision.

See What Else Is Out There

Viper Energy’s slowing earnings growth, shrinking profit margins, and reliance on future recovery make current valuations hard to justify compared to peers.

If you want companies trading at a more attractive price and stronger growth outlook, check out these 844 undervalued stocks based on cash flows with the potential for better value and upside now.

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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