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

• If you are wondering whether Targa Resources at around $171.80 is still a smart buy or if the big gains are already behind it, you are not alone. Today we are going to unpack what the current price really implies.
• Even with a modest 0.8% dip over the last week, the stock is up 10.1% over the past month, down 6.2% year to date and still sitting on sizable 168.1% and 630.0% gains over 3 and 5 years. This naturally raises questions about how much upside may be left versus the risk of a pullback.
• Recent price action has been shaped by a mix of macro energy themes, shifting expectations around US natural gas and NGL demand, and ongoing optimism about midstream infrastructure assets. Together, these factors have kept investor attention firmly on Targa's ability to convert its asset base and growth projects into durable cash flows, even as sentiment across the energy space ebbs and flows.
• Right now, Targa scores a 3/6 on our valuation checks, meaning it appears undervalued on half of the metrics we track. You can explore these in detail via our valuation scorecard. In the rest of this article we will walk through the main valuation approaches behind that score, then finish with a more nuanced way to think about what fair value means for a stock like Targa.

Find out why Targa Resources's -10.2% return over the last year is lagging behind its peers.

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

A Discounted Cash Flow, or DCF, model estimates what a company is worth by projecting the cash it can generate in the future and discounting those cash flows back to today in dollar terms.

For Targa Resources, the 2 Stage Free Cash Flow to Equity model starts with last twelve months free cash flow of about $874.1 million. Analysts expect this to rise over the next few years, with projections stepping up toward roughly $2.6 billion of free cash flow by 2029. Beyond the explicit analyst horizon, Simply Wall St extrapolates additional annual growth so that free cash flow continues to expand through the next decade.

When all these future dollar cash flows are discounted back to today, the model arrives at an intrinsic value of about $310.50 per share. Compared with the recent share price around $171.80, this implies Targa is trading at roughly a 44.7% discount to its DCF estimate. This outcome depends on the company achieving the projected cash flow trajectory.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Targa Resources is undervalued by 44.7%. Track this in your watchlist or portfolio, or discover 933 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 a profitable business like Targa Resources, the price to earnings, or PE, ratio is a useful shorthand for how much investors are willing to pay for each dollar of current earnings. What counts as a normal or fair PE depends on how fast those earnings are expected to grow and how risky or cyclical the underlying business is, with higher growth and lower risk generally justifying a higher multiple.

Targa currently trades on a PE of about 22.83x, which is well above the broader Oil and Gas industry average of around 13.49x and also richer than the peer group average of roughly 14.48x. To move beyond simple comparisons, Simply Wall St uses a proprietary Fair Ratio, which estimates what PE you might expect given Targa’s specific mix of earnings growth, margins, risk profile, industry and market cap. For Targa, this Fair Ratio is 20.22x, suggesting investors are paying a modest premium relative to what those fundamentals would typically warrant.

Because the current 22.83x PE sits meaningfully above the 20.22x Fair Ratio, this perspective points to Targa looking somewhat expensive on earnings.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1440 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, which are simply your own story about a company that ties together what you believe about its future revenues, earnings and margins with a concrete financial forecast and fair value estimate.

On Simply Wall St, Narratives are an easy to use tool on the Community page that millions of investors use to spell out their assumptions, translate those assumptions into projected financials, and then compare the resulting Fair Value to today’s Price to assess whether a stock looks like a buy, a hold or a sell.

Because Narratives are linked directly to real time data, they update automatically when new information arrives, such as earnings reports, guidance changes or major news. This helps your story and your numbers stay aligned without you having to rebuild a model from scratch.

For Targa Resources, for example, one investor might build a bullish Narrative anchored around a fair value near $240, based on expectations for growth in Permian volumes and export infrastructure. Another more cautious investor could set fair value closer to $186, focusing on competition, overbuild risk and energy transition headwinds. Each can instantly see how their view compares with the current share price.

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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