Should Investors Revisit Kinder Morgan After Recent 23.7% Surge and LNG Contract Wins?

Wondering what to do with your Kinder Morgan shares, or thinking about whether now might be the right time to get in? You are not alone. Kinder Morgan has delivered some eye-catching gains for long-term investors, even if the ride has included its share of ups and downs. Over the past five years, shareholders have seen an impressive 195.5% return, with a strong 23.7% gain just in the last year. Of course, prices do not move up in a straight line. Over the last week, shares have slid 1.6%, but zoom out and you will see a 5.0% pop in the past month, suggesting that recent momentum remains on Kinder Morgan’s side.

Behind these moves are ongoing developments in the energy infrastructure space. Investors have been encouraged by continued expansion in North American energy output, as well as Kinder Morgan's strategic position in pipeline operations. Shifts in risk perception seem to ebb and flow with each new headline, but the company’s long-term growth potential often puts it back on investors’ radar when volatility returns to the market.

But what about Kinder Morgan’s valuation? Is the current price a bargain, or already reflecting all that good news? Our analysis rates the company’s value score as 2 out of 6, indicating that it is undervalued on two major checks, while the other four suggest fair or possibly full pricing. Let’s break down what these valuation measures are actually telling us and explore whether there is an even smarter way to look at Kinder Morgan’s true worth.

Kinder Morgan scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Kinder Morgan Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future free cash flows, then discounting those projections back to today to reflect present value. In essence, this approach asks: if we know roughly how much free cash the company is expected to generate each year, what would all of those future dollars be worth right now?

For Kinder Morgan, the latest trailing twelve-month free cash flow stands at $2.2 billion. Analysts forecast a meaningful climb in annual free cash flow, with projections reaching $4.4 billion by 2029. Looking further ahead, Simply Wall St extrapolates a decade of growth, suggesting cash flow could surpass $6 billion by 2035. While the most reliable estimates extend only five years into the future, these long-term projections provide a sense of Kinder Morgan’s compound cash generation potential.

When all those future cash flows are discounted back to today, the DCF model estimates Kinder Morgan’s fair value at $44.91 per share. This represents a 37.8% discount compared to the current share price, suggesting a notable undervaluation based on this analysis.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Kinder Morgan is undervalued by 37.8%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Kinder Morgan Price vs Earnings

The Price-to-Earnings (PE) ratio is a time-tested way to value profitable companies like Kinder Morgan because it shows how much investors are willing to pay for each dollar of current earnings. A company with strong and stable profits usually deserves a higher PE ratio, but what’s considered “fair” also depends on how quickly those earnings are expected to grow and how much risk investors sense in the business.

At the moment, Kinder Morgan trades at a PE of 22.9x. That sits well above the Oil and Gas industry average of 13.1x and also exceeds the peer group average of 17.1x. On the surface, this premium implies that the market is either expecting stronger growth or sees greater stability in Kinder Morgan’s earnings compared to its industry rivals.

To get a clearer answer, Simply Wall St uses a proprietary “Fair Ratio” model that tailors a valuation multiple to Kinder Morgan’s specific situation by weighing up its earnings outlook, profit margins, business risks, industry, and market cap. For Kinder Morgan, this Fair Ratio comes out to 19.5x, indicating what investors might reasonably pay given all these factors. This detailed approach goes further than simply comparing with peers or industry averages, as it is customized for where Kinder Morgan stands now and where it is heading.

Because Kinder Morgan’s current PE ratio is slightly above its Fair Ratio, the shares look a bit expensive using this metric but not wildly so. The stock appears fairly priced relative to its growth and risk profile.

Result: ABOUT RIGHT

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 Kinder Morgan 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 your personal story about what will drive a company’s future, based on your unique perspective, research, and expectations. It combines your view of Kinder Morgan’s fair value with your estimates for future revenue, earnings, and profit margins.

Rather than relying only on numbers or historical ratios, Narratives explicitly link the company’s story and real-world outlook to a forecast and an actionable estimate of what the stock should be worth today. With Simply Wall St’s easy-to-use Community page, trusted by millions, investors can quickly build or browse Narratives for Kinder Morgan. This helps you see not just what the market or analysts expect, but how your own logic stacks up.

Narratives make it clear whether it’s time to buy, hold, or sell by comparing your Fair Value to the current share price, and automatically update as soon as new company data or news emerges. For example, some investors believe surging US LNG exports and long-term contracts could drive Kinder Morgan’s value as high as $38 per share, while others see risks from energy transitions and competition pulling it down toward $24, demonstrating just how powerful your Narrative can be for making more informed decisions.

Do you think there's more to the story for Kinder Morgan? 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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