Should You Reassess Energy Transfer After Its 3.8% Weekly Drop in 2025?

Trying to decide what to actually do with Energy Transfer? You are not alone. Many investors are weighing the mixed signals: the stock closed recently at $16.80, and while it is down 14.8% year-to-date, it has delivered a strong 10.8% gain over the last year. Even more impressive, over a three year stretch, the return stands at 87.2%, and the five-year performance jumps to a massive 328.3%. The short-term dip of 3.8% in the past week and 3.4% over the last month is grabbing attention, but long-term holders are still comfortably ahead.

What is driving these moves? Much of the recent jitteriness tracks broader market uncertainties, particularly around inflation and energy sector supply dynamics. Still, with pipeline and infrastructure demand looking relatively steady, investors appear to be reassessing risk and the potential for future growth, leading to these price adjustments. Despite short-term slips, sentiment around Energy Transfer’s long-term assets and market role remains largely positive.

Here is where it gets interesting: using six major valuation checks, the company scores a 6 out of 6 for being undervalued right now. That is a perfect score, suggesting real opportunity for investors who trust the numbers. Next, we will break down exactly what that means. Of course, not all valuation approaches are created equal, and by the end of this article, you will see an even more effective way to think about whether Energy Transfer is truly trading at a bargain.

Energy Transfer delivered 10.8% returns over the last year. See how this stacks up to the rest of the Oil and Gas industry.

Approach 1: Energy Transfer Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its expected future cash flows and discounting them to today’s dollars. For Energy Transfer, the DCF approach starts with its latest free cash flow, which stands at $7.16 billion. Analysts provide forecasts for the next five years, with projections peaking at $8.04 billion by the end of 2029. After this period, additional growth is extrapolated based on current trends and expert estimates, showing steady expansion in future cash flows.

Based on this model, the estimated intrinsic fair value per share for Energy Transfer is $41.55. This figure is significantly higher than the current share price of $16.80, implying a substantial undervaluation of about 59.6%. The model suggests that the market is not fully reflecting the strong cash generation ability of the business or its favorable growth outlook in its current price.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Energy Transfer.

Our Discounted Cash Flow (DCF) analysis suggests Energy Transfer is undervalued by 59.6%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Energy Transfer Price vs Earnings (PE Ratio)

The Price-to-Earnings (PE) ratio is a popular valuation metric for profitable companies like Energy Transfer, as it directly relates a company’s share price to its earnings performance. This multiple is particularly useful because it reflects how much investors are willing to pay for each dollar of earnings and provides insight into market expectations for growth or risk.

Growth prospects and perceived risks play a key role in what is considered a “normal” or “fair” PE. Faster-growing, lower-risk companies typically command higher PE ratios. In contrast, slower-growing or riskier companies tend to trade at lower multiples. In Energy Transfer’s case, the PE ratio currently sits at 12.9x, which is slightly below the Oil and Gas industry average of 13.4x and well below the 19.8x average of its peer group.

To get an even more accurate read, Simply Wall St’s proprietary “Fair Ratio” takes a broader view. Rather than simply comparing to industry or peers, the Fair Ratio considers Energy Transfer’s growth outlook, profitability, risk factors, and market size. For Energy Transfer, the Fair Ratio is calculated at 19.9x. By weighing these additional factors, the Fair Ratio gives a more complete perspective and helps reveal if the stock is truly undervalued or simply appears cheap in isolation.

Comparing the Fair Ratio of 19.9x to the company’s actual 12.9x PE suggests that Energy Transfer is significantly undervalued based on a detailed, company-specific benchmark.

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

Earlier, we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply the story behind the numbers, your perspective on Energy Transfer's future revenue, earnings, and profit margins, tied directly to your estimate of fair value.

This approach connects what you believe about the company with a real financial forecast and a fair value per share, making investment decisions both intuitive and evidence-based. Narratives are easy to create and track on Simply Wall St’s Community page, where millions of investors publish and refine their views alongside yours.

With Narratives, you can quickly see if your story points to a buy, hold, or sell by comparing your calculated Fair Value with today's share price. Plus, Narratives update automatically as new news or results come in, meaning your outlook always reflects the latest information.

For example, one Energy Transfer Narrative assumes earnings will reach $7.6 billion with a fair value of $25, driving strong conviction, while another more cautious view expects just $4.1 billion in earnings and a fair value of $20. With Narratives, you can see both perspectives, challenge your assumptions, and act with confidence.

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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