Is It Too Late To Consider USA Compression Partners (USAC) After Recent Price Strength?

• If you are looking at USA Compression Partners and wondering whether the current unit price offers fair value, it helps to separate recent market excitement from what the numbers actually suggest.
• The units last closed at US$27.45, with returns of 2.7% over 30 days, 15.4% year to date and 18.3% over 1 year. This may have some investors asking whether the recent run still leaves room for an appealing entry point or signals a shift in risk perception.
• Recent coverage of USA Compression Partners has focused on its position in the US energy infrastructure space and how income focused investors view its cash distributions. This helps frame why the units have drawn attention. This context matters for valuation because it shapes what investors are willing to pay for stability, income and future prospects at current prices.
• On our checks, USA Compression Partners scores 0 out of 6 for undervaluation, as shown by its valuation score. Next we will look at what different valuation approaches say about the units, before finishing with a way to assess value that goes beyond any single model.

USA Compression Partners scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: USA Compression Partners Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes estimates of a company’s future cash flows and discounts them back to today’s dollars, aiming to answer what those future cash flows are worth right now.

For USA Compression Partners, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month Free Cash Flow is reported at about $194.0 million. Analysts provide forecasts out to 2027, with Free Cash Flow for that year projected at $201.6 million. Simply Wall St then extrapolates further, with estimated Free Cash Flow of $254.1 million in 2035. All of these figures are in US$ and are below $1b, so they sit in the hundreds of millions range rather than billions.

Rolling these projections together and discounting them back produces an estimated intrinsic value of about $26.50 per unit. Against the recent unit price of $27.45, the DCF output suggests the units trade at about a 3.6% premium, which points to pricing that is very close to the modelled value rather than meaningfully cheap or expensive.

Result: ABOUT RIGHT

USA Compression Partners is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

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

Approach 2: USA Compression Partners Price vs Earnings

For a profitable business, the P/E ratio is a useful shorthand for how many dollars investors are paying for each dollar of earnings. This is why it tends to be a primary yardstick for established income producing names like USA Compression Partners.

What counts as a “normal” P/E depends on how the market sees the trade off between growth and risk. Higher expected growth or lower perceived risk can support a higher P/E, while slower growth or higher risk usually calls for a lower multiple.

USA Compression Partners currently trades on a P/E of 38.62x. That sits above both the Energy Services industry average of 26.72x and the peer average of 35.78x, which on a simple comparison suggests investors are paying a richer price for each dollar of earnings.

Simply Wall St’s Fair Ratio for USA Compression Partners is 25.11x. This is a proprietary view of what the P/E “should” be, given the partnership’s earnings profile, industry, profit margin, market cap and risk factors. Because it bakes in these company specific inputs, it can be more tailored than broad comparisons with peers or sector averages alone.

Comparing the Fair Ratio of 25.11x with the current P/E of 38.62x points to USA Compression Partners trading above this modelled range.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your USA Compression Partners Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St’s Community page you can use Narratives, where you spell out your story for USA Compression Partners and link it to clear forecasts for revenue, earnings and margins. You can then see what fair value that implies and compare it to the current price, with the fair values updating as new news or earnings arrive. This is why one investor might build a bullish USA Compression Partners Narrative around the higher US$30.00 target, while another anchors a more cautious Narrative around the lower US$23.00 view.

Do you think there's more to the story for USA Compression Partners? 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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