Venture Global’s Valuation: Weighing Analyst Concerns Against Tokyo Gas Deal and Future Prospects

Venture Global, Inc. is drawing fresh attention after announcing a major 20-year LNG supply agreement with Tokyo Gas, even as the stock faces headwinds because of analyst concerns over profit margins and arbitration risks.

See our latest analysis for Venture Global.

Despite the headline-making LNG supply pact with Tokyo Gas and major expansion filings with regulators, Venture Global’s share price return tells a tougher story. The stock has dropped more than 70% year-to-date and momentum has been fading sharply, even as the company lands new long-term contracts and grows capacity.

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With the shares trading well below analyst targets after recent setbacks, it is worth asking: Is Venture Global now undervalued in light of its LNG deals, or is the market accurately pricing in future risks and limited growth?

Price-to-Earnings of 8.5: Is it justified?

Venture Global’s shares trade at a price-to-earnings (P/E) ratio of just 8.5, with the last close at $7.13. This is well below both its peer average and what the market typically pays for similar earning power, placing the stock firmly in undervalued territory by this metric.

The price-to-earnings ratio shows how much investors are willing to pay today for a single dollar of current earnings. For Venture Global, a P/E of 8.5 means the market is assigning a modest premium for its most recent profits, especially for an energy sector company with strong earnings growth recorded in recent years.

With Venture Global’s P/E at 8.5 compared to a peer average of 21.8 and an industry average of 13.1, the stock appears particularly discounted. Our fair value modeling suggests that the P/E ratio could justify a higher share price, with the estimated fair P/E standing at 11.2. The market may be underestimating recent profit growth and overlooking improving profit margins. If sentiment shifts, the stock could re-rate significantly higher.

Explore the SWS fair ratio for Venture Global

Result: Price-to-Earnings of 8.5 (UNDERVALUED)

However, lingering arbitration risks and negative net income growth could limit any potential upside if market sentiment remains cautious around Venture Global’s fundamentals.

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

Another View: Our DCF Model Reaches a Similar Verdict

Taking a step back from price-to-earnings, our DCF model also suggests Venture Global is undervalued, with the share price trading around 31.6% below the estimated fair value of $10.42. This second approach supports the case that the market may be discounting the company's future prospects too heavily. The big question is whether current risks truly justify this gap, or if opportunity is being overlooked.

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 927 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 this outlook does not quite align with your own views, you are encouraged to dive into the data yourself and assemble a narrative in just a few minutes. Do it your way

A great starting point for your Venture Global 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.

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