Kinder Morgan (KMI): Assessing Valuation as Expanded $9.3B Project Backlog Sparks Investor Interest

If you have been tracking Kinder Morgan (KMI) lately, you are not alone. Interest around the stock has spiked as news broke about its expanded $9.3 billion project backlog, with deals anchored by firm customer agreements. These announcements, along with expectations of another year of earnings growth and some upward estimate revisions, have drawn a fresh wave of investor focus. The key question now is whether all this activity signals a shift in the company’s long-term trajectory.

Looking at the stock’s recent moves, Kinder Morgan has delivered growth of 31% over the past year, a pace that stands out against a generally cautious sentiment in energy plays. Still, recent momentum seems to have cooled a bit, with shares down 4% over the past month and roughly flat for the year so far. The company’s growing backlog and its positioning in the surging LNG export market contribute to a more dynamic picture than this year’s price action alone might suggest.

With that in mind, are investors looking at a compelling entry point, or is the market already factoring in the future upside from these new projects?

Most Popular Narrative: 13.6% Undervalued

According to the community narrative, Kinder Morgan is regarded as undervalued relative to its fair value estimate. The narrative projects a significant upside driven by long-term industry shifts and anticipated business growth.

Anticipated growth in global natural gas demand, driven by rising populations in Asia and Africa and increased energy needs from urbanization, is expected to sustain or increase utilization of Kinder Morgan's core pipeline and LNG infrastructure. This is seen as supporting long-term revenue growth through higher throughput volumes and long-term contracts.

Want to know the growth blueprint behind this high valuation? The analysts behind this narrative are betting on a potent mix of future revenue growth, rising profit margins, and a more ambitious profit multiple than you might expect. Which specific financial levers are forecast to propel Kinder Morgan far above today’s price? Unpack the narrative to see what is driving this bullish calculation.

Result: Fair Value of $31.06 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts. However, high debt levels and evolving energy transition trends could put pressure on Kinder Morgan’s future growth and challenge the current optimistic outlook. Find out about the key risks to this Kinder Morgan narrative.

Another View: DCF Model Paints a Different Picture

While the earlier approach judges value by comparing the company to its industry, our DCF model focuses primarily on future cash flows. This method also signals undervaluation. Can both be right?

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

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Kinder Morgan 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 Kinder Morgan Narrative

If you have a different perspective or want to dig into the numbers yourself, creating a custom narrative takes only a few minutes. Do it your way.

A great starting point for your Kinder Morgan research is our analysis highlighting 3 key rewards and 2 important warning signs 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.

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