Has National Fuel Gas (NFG) Share Price Gains Left Further Upside On The Table

• If you are wondering whether National Fuel Gas is genuinely good value at its recent price of US$85.77, you are not alone; many investors are asking the same question.
• The stock has returns of 2.4% over the past 7 days, 9.4% over 30 days and 22.3% over 1 year, with multi year returns of 61.6% over 3 years and 128.9% over 5 years, which naturally raises questions about what is already reflected in the price.
• Recent market interest in National Fuel Gas has been supported by ongoing coverage of the company as an integrated natural gas business with both utility and upstream assets. This often draws attention when investors reassess the sector. This broader context helps explain why the share price and longer term return profile may be getting a closer look from those focused on stability and income linked businesses.
• On our checks, National Fuel Gas records a valuation score of 4 out of 6. This points to several areas where the market price and our estimates differ, and sets up a closer look at multiples, cash flow based measures and an even more comprehensive way to think about valuation that we will come to at the end of this article.

National Fuel Gas delivered 22.3% returns over the last year. See how this stacks up to the rest of the Gas Utilities industry.

Approach 1: National Fuel Gas Discounted Cash Flow (DCF) Analysis

A DCF model takes projected future cash flows and then discounts them back to today to estimate what the entire company might be worth right now. It is essentially a way of translating future dollars into a present value.

For National Fuel Gas, the model uses a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month free cash flow is reported at $28.97 million. Analyst inputs extend out to 2028, and Simply Wall St then extrapolates further to build a ten year path of cash flows.

By 2035, the model is using a projected free cash flow of $435.62 million, with each year in between also forecast in millions of dollars and then discounted. When these discounted cash flows are added up, the DCF model arrives at an estimated intrinsic value of US$96.66 per share.

Compared with the recent share price of US$85.77, the DCF suggests National Fuel Gas trades at an 11.3% discount, which indicates the stock screens as undervalued on this cash flow view.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests National Fuel Gas is undervalued by 11.3%. Track this in your watchlist or portfolio, or discover 52 more high quality undervalued stocks.

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

Approach 2: National Fuel Gas Price vs Earnings

For a profitable company, the P/E ratio is a useful way to see how much you are paying for each dollar of earnings, which is often how the market anchors its view of value. A higher or lower P/E usually reflects what investors expect for future growth and how much risk they see in those earnings, so there is no single “right” number that fits every stock.

National Fuel Gas currently trades on a P/E of 12.44x. That sits below the Gas Utilities industry average of 14.71x and the peer group average of 19.18x. This tells you the market is applying a lower earnings multiple than it does to comparable names.

Simply Wall St’s Fair Ratio for National Fuel Gas is 19.23x. This is a proprietary estimate of what the P/E might be given the company’s earnings growth profile, margins, industry, market cap and specific risks. Because it blends these factors, it aims to give a more tailored view than a simple comparison with peers or the sector. With the current P/E of 12.44x sitting below the Fair Ratio of 19.23x, the shares screen as undervalued on this earnings multiple view.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your National Fuel Gas Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simply your story about a company combined with your view on its future revenue, earnings, margins and the fair value that follows from that forecast.

Instead of looking at the numbers in isolation, a Narrative connects what you believe about National Fuel Gas as a business to a financial model and then to a fair value, so you can clearly see how your assumptions line up with the current market price.

On Simply Wall St, Narratives sit inside the Community page and are designed to be easy to use. This allows you to compare your Fair Value to the live share price and decide whether that gap suggests a buy, a hold or a sell action for your own plan.

Narratives also refresh when new data arrives, such as earnings or company news. You will often see very different views on National Fuel Gas. For example, one investor may use a higher assumed fair value than another investor who uses a lower fair value based on more conservative forecasts.

Do you think there's more to the story for National Fuel Gas? Head over to our Community to see what others are saying!

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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