Texas Pacific Land (TPL): Valuation Insights After Q2 Earnings Miss and Dual Listing on NYSE Texas

If you’ve been watching Texas Pacific Land (TPL) lately, a few headlines might be top of mind: weaker-than-expected Q2 earnings and the company’s decision to dual list its shares on the new NYSE Texas exchange. Missing forecasts on both revenue and profit tends to spark concern. However, the unique twist here is the fresh dual listing, opening the door to a broader investor base and potentially new momentum. These developments naturally raise the question: how should investors interpret this shifting landscape for TPL?

Compared to a year ago, Texas Pacific Land has delivered a healthy total return of 16%, even as shares have stumbled nearly 21% year-to-date. Short-term moves reflect mixed sentiment, with the past month showing a 6% recovery, though that comes after a tough stretch over the past 3 months. The company’s decision to join NYSE Texas as a Founding Member while keeping its main NYSE listing is a first for TPL and may have implications for liquidity and visibility moving forward.

After this up-and-down ride, is Texas Pacific Land trading at an attractive entry point, or is the market already factoring in its next phase of growth?

Most Popular Narrative: 1.7% Overvalued

According to the most widely followed narrative, Texas Pacific Land is considered slightly overvalued relative to its projected growth and profit outlook.

Beneficial reuse and desalination initiatives, along with advancing transmission and data center infrastructure in the Permian, provide exposure to future monetization avenues such as industrial water supply, renewable energy, and land leases. These developments enhance potential for diversified long-term revenue and asset value growth.

Curious how bullish assumptions on revenue growth and profit margins could lead to such a high fair value for a land royalty business? One key factor that analysts are including in this price target is a profit multiple that rivals many fast-growing tech companies. Want to know how the numbers stack up and what makes this valuation tick? Explore the full narrative to uncover the surprising drivers behind this ambitious outlook.

Result: Fair Value of $921.93 (OVERVALUED)

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

However, robust growth in oil royalty production or accelerating water services expansion could challenge the prevailing view and support a more optimistic valuation for TPL.

Find out about the key risks to this Texas Pacific Land narrative.

Another View: Discounted Cash Flow Perspective

While the previous valuation is shaped by market optimism and future growth, our SWS DCF model takes a more conservative approach by focusing on long-term cash flows. This method also suggests TPL is overvalued. Could these contrasting approaches signal underlying risks in today's price?

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 Texas Pacific Land 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 Texas Pacific Land Narrative

If you have a different perspective or want to run your own numbers, it takes just a few minutes to shape your own view. Do it your way

A great starting point for your Texas Pacific Land research is our analysis highlighting 1 key reward 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.

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