Is There Still Opportunity in UGI After a 43% Run in 2025?

If you have been watching UGI recently, you have probably noticed its share price has been anything but boring. After a year marked by steady momentum, UGI’s stock is up a whopping 43.3% over the past twelve months. That includes a 19.2% gain year-to-date, so it is no surprise that investors are wondering if there is still room for the stock to run or if it is time to tread cautiously.

Much of this optimism seems to be driven by the company’s ongoing strategic initiatives, like the steady progress in renewable energy projects and a clearer outlook for its regulated utility business. News of infrastructure investments and expansion into cleaner energy segments have caught the eye of analysts, hinting at growth potential that is starting to be priced in. At the same time, UGI is navigating an evolving energy landscape. This environment creates new risks but also plenty of opportunities.

With all the buzz around this name, it comes down to valuation. Is UGI undervalued given where it stands today? According to our current assessment, UGI achieves a strong value score of 5 out of 6, meaning it passes five undervaluation checks out of six major valuation criteria. That is an impressive showing. Let’s break down those numbers, see what they really mean for investors, and consider why there might be an even better way to look at UGI's valuation than just the usual metrics.

UGI delivered 43.3% 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 is one of the most respected ways to value a business. In essence, it works by estimating the cash that a company will generate in the future and then discounting those amounts back to today to reflect their present value. This gives investors a robust way to judge what a company is worth, based solely on its cash-generating power.

For UGI, the starting point is its latest Free Cash Flow (FCF), which came in at $498.4 million over the last twelve months. Projections for UGI’s FCF show steady growth, with estimates rising each year and reaching $660.8 million by 2035, according to Simply Wall St’s extrapolation methodology. Notably, FCF growth rates for the next decade range from around 2.4% to just over 3%, suggesting solid but sustainable expansion in UGI's core business.

When all these projected cash flows are added up and discounted back to today, the resulting intrinsic value for UGI stock is estimated at $57.08 per share. With this calculation, the DCF model implies UGI shares are currently trading at a 40.9% discount to their fair value, which suggests the stock may be undervalued at current prices.

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 40.9%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: UGI Price vs Earnings

For profitable companies like UGI, the Price-to-Earnings (PE) ratio is a widely respected valuation measure. The PE ratio tells investors how much they are paying for each dollar of current earnings, which makes it an especially useful gauge when assessing established, income-generating businesses.

It is important to remember that a "normal" or fair PE is influenced by a company’s growth prospects, profitability, risk, and its industry standing. Higher expected growth or lower risk can justify a higher PE, while slow growth or higher risk typically supports a lower ratio.

• UGI’s current PE ratio: 17.34x
• Gas Utilities industry average PE: 13.52x
• Peer average PE: 23.02x

To provide a more tailored comparison, Simply Wall St calculates a proprietary "Fair Ratio," which accounts for UGI’s earnings growth, profit margins, market cap, industry, and risk profile. Unlike simple benchmarks such as peer or sector averages, this Fair Ratio gives a more nuanced, "apples-to-apples" view of valuation by reflecting what investors should expect for a business with UGI’s characteristics. For UGI, the Fair Ratio stands at 20.89x, which is moderately above the current PE.

Given this, UGI is trading at a discount compared to its Fair Ratio. This means that, based on growth and fundamentals, the stock appears undervalued by this quality-adjusted measure.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your UGI Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a simple, story-driven approach where you describe your perspective on a company and then connect that story directly to your own assumptions about its fair value, future revenues, earnings, and profit margins. In other words, Narratives let you link what you believe will happen at UGI to a financial forecast, and from there, to an estimate of what the stock is actually worth.

This approach gives investors greater clarity, making it easy to track and update their investment thesis as new information arrives. On Simply Wall St’s Community page, millions of investors are already using Narratives, a free, accessible tool, to define their view on a company and instantly see how their fair value compares to the current market price and other perspectives.

Narratives help you decide when to buy or sell by automatically showing the gap between what you think UGI is worth and the price right now, and they continuously update whenever news or earnings are released. For example, one UGI Narrative might forecast robust growth from higher Pennsylvania utility rates and renewable gas expansion and arrive at a fair value of $41.00 per share. A more cautious view might factor in regulatory risk, margin pressure, or demand decline, resulting in a much lower fair value. This dynamic, transparent approach keeps your investment decisions as informed and up-to-date as possible in a single glance.

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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