Targa Resources (TRGP) shares have been generally trending lower over the past month, down 2%, and have fallen 6% over the past 3 months. Investors may be taking a closer look at the company’s recent performance and valuation, given these moves.
Looking at the bigger picture, Targa Resources has seen share price momentum fade recently, with the stock slipping in the short term and total shareholder return rising just 0.1% over the past year. This comes as the sector experiences steady growth and evolving expectations.
But with the stock now trading at a notable discount compared to analyst targets, the question remains: is Targa Resources undervalued, presenting a potential buying opportunity, or is the market already pricing in its future growth?
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Most Popular Narrative: 20.8% Undervalued
Compared to the latest close of $162.65, the most followed narrative suggests Targa Resources has meaningful upside, with a fair value estimate far above its current level. This wide gap prompts a closer look at the driving forces behind the bullish outlook.
Targa's strategic focus on long-term, fee-based contracts with blue-chip producers and end-users has driven resilience in cash flows, even amid commodity price volatility, and sets the stage for more predictable, higher free cash flow available for shareholder returns and potential deleveraging.
Curious what bold projections justify such optimism? The key narrative factors include an ambitious profit margin path and industry-beating growth rates. These elements set a financial target that you might not expect from a company in this space. See the exact forecasts and model assumptions that drive this valuation.
However, risks remain, including intensifying competition in core regions and the potential overbuild of export infrastructure. Both factors could pressure future margins and growth.
Another View: Price-to-Earnings Paints a Different Picture
While the fair value model points to sizable upside, Targa Resources is trading at a price-to-earnings ratio of 23, noticeably above both its industry peers (13.5) and the market’s fair ratio of 19.3. This suggests the market already credits the company with a premium. Does this signal opportunity or added risk?
If you want to draw your own conclusions or think a different case is more compelling, you can easily build a custom narrative in just minutes. Do it your way
A great starting point for your Targa Resources research is our analysis highlighting 4 key rewards and 3 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.
Valuation is complex, but we're here to simplify it.
Discover if Targa Resources might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
Together with its subsidiary, Targa Resources Partners LP, owns, operates, acquires, and develops a portfolio of complementary domestic infrastructure assets in North America.
