Is It Too Late To Consider USA Compression Partners (USAC) After Strong Multi‑Year Returns?

• If you are wondering whether USA Compression Partners at around US$27.29 is priced attractively or not, the key is to separate share price excitement from underlying value.
• The unit price is down 2.4% over the last 7 days and 0.1% over the last 30 days, yet it still shows a 14.7% return year to date and 10.3% over the past year, with longer term returns of 66.1% over 3 years and 207.2% over 5 years.
• These moves sit against a backdrop of ongoing interest in energy infrastructure partnerships and income focused investments. These often attract investors who pay close attention to cash flows and distributions. For USA Compression Partners, that context matters when judging whether recent returns are aligned with fundamentals or simply reflecting changing sentiment toward the broader energy services space.
• Even with this performance history, USA Compression Partners currently scores 0 out of 6 on our valuation checklist, as shown by its valuation score. The next step is to look at how different valuation methods assess the units and then consider an even more complete way to think about value later in the article.

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 estimates what a business could be worth today by projecting its future cash flows and then discounting those back to a present value.

For USA Compression Partners, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flows reported in US$. The latest twelve months Free Cash Flow is around $194.0 million. Analyst inputs and extrapolated estimates point to Free Cash Flow of $201.6 million in 2027, with a series of projected cash flows running out to 2035, all summed and discounted using the DCF framework.

Bringing those projections back to today gives an estimated intrinsic value of about $26.50 per unit, compared with a recent unit price of roughly $27.29. That implies the units trade at around a 3.0% premium to this DCF estimate, which is a small gap and sits well within a reasonable margin of error for this kind of model.

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 profitable companies, the P/E ratio is a useful way to relate what you pay per unit to the earnings generated per unit. It helps you see how many years of current earnings the market is effectively pricing in.

What counts as a “normal” P/E depends on how investors view growth potential 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 one.

USA Compression Partners currently trades on a P/E of 38.4x. That sits above the Energy Services industry average of about 29.5x and also above the peer average of roughly 34.6x. Simply Wall St’s Fair Ratio for USA Compression Partners is 25.2x, which reflects a tailored view of what the P/E could be given its earnings growth profile, industry, profit margins, market cap and risk factors.

This Fair Ratio can be more informative than a simple comparison with peers or the industry because it adjusts for company specific characteristics rather than relying on broad group averages. Comparing the current 38.4x P/E to the 25.2x Fair Ratio points to the units trading at a richer multiple than this framework would suggest.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your USA Compression Partners Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Think of a Narrative as the simple story you tell about USA Compression Partners that links your view of its contracts, risks and opportunities to a set of numbers, a revenue and earnings path, margins, and a fair value. All of this is brought together in an easy tool on Simply Wall St’s Community page that helps you compare that fair value with today’s price, react quickly when new news or earnings figures update the Narrative, and see how different investors can reasonably land on a US$33 view or a US$25 view for the units based on the same information but contrasting expectations.

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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