Does Targa Resources Still Offer Upside After Its Huge Multi Year Price Surge?

• Wondering if Targa Resources at around $178 a share is still a smart buy or if most of the upside is already priced in? You are not the only one trying to sort out whether this run has more to give.
• The stock has slipped about 2.5% over the last week but is still up roughly 5.0% over the past month and 3.3% over the last year, on top of a massive 160.5% 3‑year and 643.2% 5‑year gain that has completely changed how the market sees its growth and risk profile.
• Those moves are happening against a backdrop of steady midstream demand, expanding US natural gas and NGL volumes, and continued investor rotation into energy infrastructure names that can pass through inflation and generate cash. At the same time, Targa has been in focus as it builds out gathering, processing, and export capacity, which the market views as a long runway for fee based revenue rather than a short term trading story.
• Despite that history, Targa only scores a 2 out of 6 on our valuation checks. In the rest of this article we will walk through how traditional valuation tools line up with that score and then hint at a more complete way to judge value that goes beyond just the headline multiples at the very end.

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

Approach 1: Targa Resources Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth today by projecting the cash it can generate in the future and then discounting those cash flows back to their present value.

For Targa Resources, the model starts with last twelve months Free Cash Flow of about $874.1 million. Analysts provide detailed forecasts for the next few years. Beyond that, Simply Wall St extrapolates growth, reflecting expectations that expanding midstream infrastructure will keep lifting cash generation. Under these assumptions, Targa’s Free Cash Flow is projected to reach roughly $3.2 billion by 2029 and continue rising toward the mid $4 billion range by 2035, all in $.

When those future cash flows are discounted back using a 2 Stage Free Cash Flow to Equity framework, the estimated intrinsic value comes out at about $394.48 per share. Compared with a recent share price around $178, the DCF implies the stock is roughly 54.7% undervalued.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Targa Resources is undervalued by 54.7%. Track this in your watchlist or portfolio, or discover 916 more undervalued stocks based on cash flows.

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

Approach 2: Targa Resources Price vs Earnings

For profitable companies like Targa Resources, the Price to Earnings (PE) ratio is a useful way to gauge how much investors are paying for each dollar of current earnings. It ties today’s share price directly to the bottom line, which makes it easier to compare across time and against other businesses.

What counts as a fair PE depends on two big levers: expected growth and risk. Faster, more reliable earnings growth usually justifies a higher PE, while higher business or balance sheet risk should push it lower. Against that backdrop, Targa currently trades on about 23.73x earnings, well above the Oil and Gas sector average of roughly 12.95x and above a peer group closer to 14.00x.

Simply Wall St’s Fair Ratio framework refines this further by estimating what PE Targa should trade on, given its earnings growth outlook, industry, profit margins, size, and risk profile. That Fair Ratio comes out at about 20.29x, which is more tailored than a simple comparison to peers or sector averages. With the actual PE of 23.73x sitting above the 20.29x Fair Ratio, the multiple analysis points to Targa being somewhat richly valued on earnings.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1455 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Targa Resources Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple tool on Simply Wall St’s Community page that lets you connect your view of Targa Resources’ story to specific revenue, earnings, and margin forecasts. You can then turn those into a Fair Value and continually compare that Fair Value to the current share price as new news, guidance, and earnings arrive. For example, one investor might build a bullish Targa Narrative around expanding Permian volumes, export growth, and rising buybacks that supports a Fair Value near $240 per share. Another might emphasize overbuild risks, regulatory pressure, and softer macro assumptions that justify a more cautious Fair Value closer to $186.

Do you think there's more to the story for Targa Resources? Head over to our Community to see what others are saying!

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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