Is It Time To Reconsider Antero Midstream (AM) After Its Strong Multi Year Share Price Run?

• If you are wondering whether Antero Midstream’s current share price reflects its true worth, the starting point is to look closely at what recent returns and valuation signals are telling you.
• The stock last closed at US$22.75, with a 7 day return of 3.4% decline, a 30 day return of 0.3% decline, a year to date return of 26.8% and a 1 year return of 33.2%, while the 3 year and 5 year returns are very large.
• These returns give important context for anyone assessing value, as they show how the market has rewarded Antero Midstream over different time frames. They also set up the key question of whether the current price fairly reflects what investors are paying for future cash flows and income potential.
• Right now, Antero Midstream has a valuation score of 2/6, which means it screens as undervalued on 2 of 6 checks. The next step is to compare different valuation approaches and then look at an even more complete way to think about the company’s value at the end of this article.

Antero Midstream scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Antero Midstream Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model projects a company’s future cash flows and then discounts them back to today’s dollars to estimate what the business could be worth right now.

For Antero Midstream, the model uses a 2 Stage Free Cash Flow to Equity approach, starting from last twelve months free cash flow of about $723.6 million. Analyst estimates and extrapolated figures put projected free cash flow at $1,111.6 million in 2030, with a series of annual forecasts between 2026 and 2035 that are discounted back using Simply Wall St’s cash flow projections method.

Putting these cash flows together, the DCF model arrives at an estimated intrinsic value of about $59.05 per share. Compared with the recent share price of US$22.75, this implies an intrinsic discount of roughly 61.5%, indicating that the shares currently appear undervalued on this cash flow view.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Antero Midstream is undervalued by 61.5%. Track this in your watchlist or portfolio, or discover 62 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 Antero Midstream.

Approach 2: Antero Midstream Price vs Earnings

For a profitable company like Antero Midstream, the P/E ratio is a useful way to relate what you pay per share to the earnings the business is currently generating. Investors usually expect companies with stronger growth prospects or lower perceived risk to trade on a higher “normal” P/E, while slower growth or higher risk can justify a lower multiple.

Antero Midstream currently trades on a P/E of about 26.08x. That is above both the Oil and Gas industry average P/E of 15.61x and the peer group average of 20.19x, so on simple comparisons the shares are priced higher than many peers per dollar of earnings.

Simply Wall St’s Fair Ratio for Antero Midstream is 25.18x. This is a proprietary estimate of what a reasonable P/E might be given factors such as earnings growth, industry, profit margin, market cap and company specific risks. Because it blends these elements, the Fair Ratio can give a more tailored yardstick than broad industry or peer averages. Set against this Fair Ratio, Antero Midstream’s current P/E of 26.08x is a bit higher, which points to the shares being slightly overvalued on this metric.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Antero Midstream Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you connect your view of Antero Midstream’s story with concrete forecasts and a fair value, then compare that fair value to the current price to decide what makes sense for you. Each Narrative is hosted on the Community page, updates automatically when new earnings or news arrive, and reflects different perspectives. For example, one investor sees buybacks, stable margins and fee based revenue as support for a fair value around the analyst consensus of US$21.57. Another investor focuses more on customer concentration, regulation and energy transition risk and arrives closer to the lower US$19.00 end of the analyst range.

Do you think there's more to the story for Antero Midstream? 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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