Venture Global (VG): Examining the Stock’s Valuation After Recent Market Movement

Venture Global (VG) shares have seen a modest bump this week, drawing attention from market watchers even in the absence of headline-grabbing company developments. Investors appear to be weighing value prospects based on recent performance and fundamentals.

See our latest analysis for Venture Global.

After a steep sell-off earlier this year, Venture Global’s share price has rebounded slightly this week but remains far below its starting point for 2024, with a 1-month share price return of -33.8% and a year-to-date decline approaching 60%. In both the short term and the long term, the stock’s momentum has faded as investors reassess its growth outlook and risk profile.

If you’re looking to expand your investment radar beyond the usual suspects, this could be a great time to explore fast growing stocks with high insider ownership.

With shares trading at a significant discount to analyst targets and recent growth slowing, the question remains: is Venture Global undervalued at current levels, or is the market already anticipating what comes next?

Price-to-Earnings of 18.2x: Is it justified?

Venture Global is trading on a price-to-earnings (P/E) ratio of 18.2x, which is above both the broader oil and gas industry average of 13.1x and the company's fair P/E ratio of 14.3x, based on current fundamentals. With the last close price at $9.64, this premium suggests investors are either optimistic about future prospects or underestimating some risks.

The price-to-earnings ratio measures how much investors are willing to pay today for a dollar of current earnings. In the energy sector, this metric helps gauge whether a stock’s valuation is supported by expected profit growth or if it is outpacing industry realities.

Venture Global’s ratio indicates the stock is being priced more highly than its sector competitors. Additionally, the market is currently valuing it higher than what standard valuation models would justify. If the P/E were to adjust down toward the suggested fair value of 14.3x, there could be pressure on the share price.

Compared to the US oil and gas industry, Venture Global’s P/E stands out as expensive. While peers are averaging 13.1x, Venture Global’s earnings multiple is notably higher. The market could be pricing in expectations that may not align with industry trends. The fair value estimate, based on statistical benchmarks, implies that the current premium could be vulnerable if growth slows.

Explore the SWS fair ratio for Venture Global

Result: Price-to-Earnings of 18.2x (OVERVALUED)

However, persistent revenue growth deceleration and narrow net income gains could undermine investor confidence. This could potentially reverse recent optimism in the stock’s valuation.

Find out about the key risks to this Venture Global narrative.

Another View: Discounted Cash Flow Suggests Undervaluation

Looking at Venture Global through the lens of the SWS DCF model offers a different perspective. This approach estimates shares are trading about 30.5% below fair value. The calculated fair value is $13.87 compared to the current price of $9.64. Could the market be overlooking long-term potential?

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 Venture Global 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 Venture Global Narrative

If you have your own perspective or want to see how the numbers fit your outlook, it only takes a few minutes to build a personal view of Venture Global. Do it your way.

A great starting point for your Venture Global research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

Unlock your next big opportunity with the Simply Wall St Screener. If you want to catch the next breakout, it pays to look beyond familiar names.

• Tap into surging market momentum by checking out these 875 undervalued stocks based on cash flows delivering strong cash flow at overlooked prices.
• Benefit from resilient income streams by exploring these 17 dividend stocks with yields > 3% with yields above 3% that help power long-term growth in your portfolio.
• Get ahead of technological transformation by seeing which companies are redefining the industry with breakthroughs in artificial intelligence through these 27 AI penny stocks.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com