Is There Now an Opportunity in UGI After Upbeat 2025 Earnings Guidance?

If you’ve been watching UGI lately, you’re not alone. Deciding whether to buy, sell, or hold has become a real conversation starter, especially now that the stock has put up some intriguing numbers. Despite slipping ever so slightly over the past week, down 0.6%, and gliding a bit lower in the last month, off by 5.3%, the longer-term story is exactly where people are focusing their attention. Over the past year, shares are up a strong 40.5%, and since the start of the year, the stock is showing an impressive 14.7% gain. Even stretching out to three and five years, UGI’s returns of 16.6% and 15.7% are nothing to ignore.

Some of this momentum can be traced back to broader market shifts. Investors are warming back up to utilities, especially those positioned to capture renewed growth and stability, and UGI has been riding that sentiment with confidence. But whisperings about changing risk perceptions and potential for further upside are also giving the stock an added bit of energy.

If you’re eyeing UGI with valuation in mind, here’s the key stat: the company scores 5 out of 6 on our undervaluation checklist. That’s a signal worth paying attention to, but it’s just the start. So how does UGI stack up on the valuation front, and what’s the smartest way to make sense of it all? Let’s break down the main valuation approaches and stick around, because the best way to answer whether UGI is truly undervalued might surprise you.

UGI delivered 40.5% returns over the last year. See how this stacks up to the rest of the Gas Utilities industry.

Approach 1: UGI Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's value by projecting its future free cash flows and discounting them back to today's dollars. The idea is simple: evaluate a company not just on what it earns now, but on what it is likely to generate for shareholders over years to come.

For UGI, the latest reported Free Cash Flow stands at $498.4 million. Based on analyst estimates and further projections, free cash flow is expected to gradually climb over the next decade. In 2026, for instance, projected FCF is $510.4 million, and by 2035, that figure is estimated to reach $660.8 million. These increments reflect annual growth rates between roughly 2.4% and 3.1%, illustrating a steady, moderate upward trend.

When these future cash flows are discounted back to present value, the DCF model arrives at an intrinsic share price of $57.37. This represents a substantial 43.5% discount compared to where the stock trades today, signaling that UGI is significantly undervalued according to this method.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests UGI is undervalued by 43.5%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: UGI Price vs Earnings (P/E)

For profitable companies like UGI, the Price-to-Earnings (P/E) ratio is one of the most straightforward ways to gauge valuation. It answers a simple question: how much are investors willing to pay for every dollar of UGI’s earnings? The P/E works well in this case because UGI has consistent positive earnings, making profit-based comparisons meaningful.

A "normal" or "fair" P/E ratio isn’t one-size-fits-all. It depends on factors like the company's growth outlook and risk profile. Faster-growing or lower-risk companies can generally support higher P/E ratios, while slower-growing or riskier businesses should trade at a discount.

UGI currently trades at a P/E of 16.7x. That’s somewhat above the Gas Utilities industry average of 13.2x, but below the peer group average of 23.4x. The secret weapon here is the Fair Ratio, calculated by Simply Wall St to reflect not just market averages but the company’s unique earnings growth, margins, industry norms, market size, and risk. For UGI, the proprietary Fair Ratio stands at 21.8x.

The Fair Ratio is more insightful than simply comparing with industry or peers because it factors in the real-world nuances of UGI’s own strengths, risks, and future prospects. With UGI’s actual P/E notably below its Fair Ratio, the stock looks attractively valued based on earnings.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your UGI Narrative

Earlier, we mentioned there is an even better way to understand valuation, so let's introduce you to Narratives, a smarter, more dynamic tool designed to put you in the driver’s seat of your investment research.

A Narrative is your personal, evidence-based story about a company’s future, built from your perspective on its revenue growth, earnings and profit margins, and what those numbers suggest about its fair value.

By connecting UGI’s business story, such as regulatory wins in Pennsylvania or investing in renewable gas, with financial forecasts, Narratives help you see how the numbers and your investment thesis shape the company’s true value.

On Simply Wall St's Community page, Narratives are accessible and intuitive, allowing you to compare your view with those of other investors. Beyond number crunching, Narratives let you easily see whether UGI looks undervalued (or not) by comparing its current share price with the fair value in your Narrative.

Whenever there is big news or new results, Narratives are updated in real time, so your insights always reflect the latest available information.

For example, one investor might build a Narrative forecasting UGI’s revenue to grow quickly and margins to improve, arriving at a fair value of $57.37 per share. Another investor with a more cautious view projects less growth and outfits their Narrative with a fair value of $41.00 per share.

Do you think there's more to the story for UGI? Create your own Narrative to let the Community know!

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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