Black Stone Minerals (BSM): Valuation Spotlight After Insider Buying and Major Ellipsis Farmout Deal

Simply Wall St

Black Stone Minerals (NYSE:BSM) has given investors a lot to digest lately. The CEO, Thomas L. Carter, just picked up 41,000 shares, a move that shows real conviction from inside the company. At the same time, Black Stone announced a major farmout agreement with Ellipsis U.S. Onshore Holdings. This agreement covers a massive 270,000 gross acres in East Texas and is backed by a multi-year drilling commitment. However, the company also trimmed its quarterly dividend after signaling lower production and distribution expectations for the near term. These developments raise a key question for anyone watching the stock: are insiders betting on an inflection point in the business, or simply buying the dip?

Looking at the past year, Black Stone Minerals’ share price has drifted lower, down about 8% over the past twelve months and off 15% year-to-date. Despite this, the five-year return is still strong, at nearly 188%, reflecting the company’s historical ability to grow and return cash. While the dividend cut and slowing production have dampened some enthusiasm, the Ellipsis deal provides reasons to believe longer-term growth could return, especially after a period of fading momentum.

With shares under pressure but management buying in and new deals taking shape, is the market overlooking Black Stone’s future potential, or is all this optimism already reflected in the price?

Most Popular Narrative: 5% Undervalued

According to the prevailing community narrative, Black Stone Minerals is considered undervalued by roughly 5%. Future growth opportunities and improved diversification are cited as key factors supporting its fair value assessment.

Ongoing operator diversification, through the onboarding of multiple top-tier operators and a shift from a single operator to several with over 20 well obligations per year each, reduces concentration risk. This approach also establishes a pipeline for increased drilling activity through the end of the decade and supports long-term revenue growth.

What is fueling the belief that Black Stone Minerals’ valuation still has room to increase? This narrative centers on a structural change in drilling strategy, ambitious growth of the portfolio, and bold financial outlooks. Interested in how a combination of expanding margins and new production volumes contributes to their price target? The numbers supporting this view may be surprising.

Result: Fair Value of $13.00 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, slower natural gas growth and concentrated basin exposure could threaten the bullish outlook. These factors may keep investors watchful, despite management optimism.

Find out about the key risks to this Black Stone Minerals narrative.

Another View: Our DCF Model Suggests Deeper Value

While analysts see Black Stone Minerals as only modestly undervalued, our DCF model presents a more optimistic picture. This approach suggests there may be greater upside than the consensus target implies. Could the market be missing a larger opportunity?

Look into how the SWS DCF model arrives at its fair value.
BSM Discounted Cash Flow as at Aug 2025
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Black Stone Minerals 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 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 Black Stone Minerals Narrative

If you’re looking to take a different view or want to dig through the details yourself, you can craft your own valuation in just a few minutes and do it your way.

A great starting point for your Black Stone Minerals research is our analysis highlighting 3 key rewards and 1 important warning sign 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.

Valuation is complex, but we're here to simplify it.

Discover if Black Stone Minerals might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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