Does Energy Transfer’s Recent Price Fall Signal an Opportunity for 2025?

Thinking about what to do with your Energy Transfer shares or wondering if now is the time to jump in? You are definitely not alone. The stock has been on quite a journey, with one-year total returns at nearly 16.6%, and an impressive 85% over the past three years. Over the last five years, returns have approached 300%. Yet shares have dipped this year, pulling back about 11% year-to-date, and the price now sits at $17.51. This is a noticeable 30% discount to the average analyst target and an even steeper 53.5% below some intrinsic value estimates. That kind of gap tends to catch the attention of value hunters and skeptics alike.

Much of this year’s slide seems tied more to shifting investor sentiment than any real trouble in the company’s fundamentals. Annual revenue and net income are both still growing, up 6.9% and 11.7%, respectively. This suggests Energy Transfer’s long-term story may be more intact than short-term price action would indicate. In fact, if we run the numbers by six different valuation checks, the company scores a strong 5 out of 6, identifying it as undervalued in almost every respect.

So what does that mean for the actual value of Energy Transfer today? Let’s break down those six valuation tests to see if that big discount is justified, or if there is more potential than the market currently realizes. Be sure to read on, because there is an even deeper way to make sense of all these numbers coming up at the end.

Energy Transfer delivered 16.6% returns over the last year. See how this stacks up to the rest of the Oil and Gas industry.

Approach 1: Energy Transfer Cash Flows

A Discounted Cash Flow (DCF) model estimates what a business is worth by predicting its future cash flows and discounting them back to the present. This method helps investors see what a company could truly be worth, regardless of fluctuations in the stock market.

Energy Transfer currently generates Free Cash Flow of $7.16 Billion. Analysts forecast steady growth over the coming decade. By 2029, Free Cash Flow is projected to reach $8.04 Billion, and forecasts continue to increase modestly beyond that. Using a comprehensive 2 Stage Free Cash Flow to Equity model and these projections, the DCF calculates an estimated intrinsic value of $37.64 per share.

With Energy Transfer shares trading at $17.51, this result suggests that the stock is 53.5% undervalued based on cash flow fundamentals alone. The DCF model shows that the current market price may not fully reflect the company’s underlying cash generation potential.

Result: UNDERVALUED

Our DCF analysis suggests Energy Transfer is undervalued by 53.5%. Track this in your watchlist or portfolio, or discover more undervalued stocks based on DCF analysis.

Approach 2: Energy Transfer Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used method to value profitable companies because it relates a company’s market price to its earnings power. For investors, it provides a quick sense of whether a stock is expensive or cheap compared to the profit it produces. Generally, a higher PE can reflect higher growth expectations or lower perceived risk, while a lower PE suggests the market is factoring in slower growth or greater risk.

Energy Transfer currently trades at a PE ratio of 13.4x. This is almost in line with the Oil and Gas industry average of 13.2x and noticeably below the typical peer, which averages around 18.6x. In addition, Simply Wall St’s proprietary Fair Ratio for Energy Transfer is 17.5x, based on an analysis of the company’s specific mix of earnings growth, profitability, size, and risks relative to the wider market.

When comparing the Fair Ratio of 17.5x to the actual multiple of 13.4x, it suggests that shares appear undervalued on a PE basis. The market does not appear to be fully recognizing the company’s earnings strength relative to industry and peer benchmarks.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Energy Transfer Narrative

A Narrative is a simple but powerful way of investing by telling "the story behind the numbers." It is your personal perspective on a company, tying together what you believe about its business, future revenue and profit growth, and the fair value those fundamentals deserve.

Rather than just looking at cold statistics, a Narrative connects a company’s larger business story to the actual financial forecasts, and, ultimately, to what you think a share is really worth today. Narratives make investment decisions easier and more accessible, especially on the Simply Wall St platform, where millions of investors create and update these stories to help each other make better choices.

By building or browsing Narratives, you can quickly compare your estimate of Fair Value with the current Share Price. This helps you identify when the math and the story signal a good time to buy or sell. Additionally, these Narratives stay up to date as new news or earnings are released, so your outlook always evolves with the latest information.

For example, some Energy Transfer investors see upside and forecast a fair value of $25.00 based on aggressive revenue growth and margin assumptions. In contrast, more cautious investors set their fair value closer to $20.00, showing how perspectives and price targets can vary even with the same data.

Do you think there's more to the story for Energy Transfer? Create your own Narrative to let the Community know!

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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