A Look At NGL Energy Partners (NGL) Valuation After New Shelf Registration Filing

Why NGL Energy Partners Filed a New Shelf Registration

NGL Energy Partners (NGL) has filed a shelf registration to potentially issue 10,000,000 common units, totaling about US$121.3 million, tied to an ESOP related offering that could matter for existing unitholders.

See our latest analysis for NGL Energy Partners.

At a share price of US$11.98, NGL Energy Partners has seen a 17.45% 1 month share price return and a very large 1 year total shareholder return of about 2.5x, which points to building momentum as investors weigh the new shelf registration against recent performance.

If this kind of capital raising story has you looking across the energy value chain, it may be a good moment to scan 23 power grid technology and infrastructure stocks as a fresh set of ideas to research next.

With the units up sharply over the past year and the shelf pointing to possible future dilution, the key question now is simple: Is NGL still trading below its estimated intrinsic value, or is the market already pricing in further growth?

Preferred Price-to-Sales of 0.4x: Is It Justified?

On the surface, NGL Energy Partners looks inexpensive, with a P/S of 0.4x versus 2.4x for peers and 1.8x for the broader US Oil and Gas group.

The P/S ratio compares the partnership's market value to its revenue, which can be useful when earnings are negative, as they are for NGL today. Given that NGL reported revenue of $3,525.45m and a net loss of $33.629m, the market is clearly focusing more on sales capacity and future cash generation than on current profitability.

According to Simply Wall St's checks, NGL screens as good value on P/S compared to both its direct peer set and the wider industry, while also trading about 23.8% below the SWS DCF fair value estimate of $15.73 per unit. That combination suggests the current multiple reflects cautious expectations even though earnings are forecast to grow strongly and the partnership is expected to move into profitability over the next 3 years.

Relative to the US Oil and Gas industry average P/S of 1.8x and a peer average of 2.4x, NGL's 0.4x stands out as materially lower. The SWS fair P/S estimate sits at roughly the same level of 0.4x, implying that if the market re-rates closer to that fair ratio, the shift would likely come from changes in price rather than a higher target multiple.

Explore the SWS fair ratio for NGL Energy Partners

Result: Price-to-Sales of 0.4x (UNDERVALUED)

Behind this valuation, the SWS DCF model points to a fair value of $15.73 per unit versus the last close of $11.98, implying NGL trades at a discount. The DCF approach projects future cash flows for the partnership and discounts them back to today using a required rate of return, which helps translate long term forecasts into a single present value figure.

For a business that is currently loss making but expected to shift into profitability, the DCF framework is particularly relevant because it can weigh near term losses against potential future cash generation. In the case of NGL, forecasts of strong earnings growth, despite revenue being expected to decline on average, are key inputs that shape the SWS model outcome.

Look into how the SWS DCF model arrives at its fair value.

However, the shelf registration and recent revenue decline of 31% could weigh on sentiment if unitholders begin to focus more on dilution and earnings quality.

Find out about the key risks to this NGL Energy Partners narrative.

Another View: DCF Points To Further Upside

While the 0.4x P/S suggests NGL Energy Partners screens as cheap against peers, the SWS DCF model goes further and points to a fair value of $15.73 per unit versus the current $11.98. That implies the units trade at a discount, but how comfortable are you with the cash flow assumptions behind that gap?

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 NGL Energy Partners 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 53 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

If these mixed signals have you torn, it is worth checking the numbers yourself and moving quickly to firm up your own stance. This includes a closer look at 3 key rewards.

Ready For More Ideas To Research Next?

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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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