Is It Time To Revisit Energy Transfer (ET) After Strong One Year Price Performance?

• Wondering if Energy Transfer at around US$19.07 is offering value or asking too much? This article focuses on what the current price might mean for you as a long term investor.
• The stock shows returns of 1.9% over 7 days, 0.1% over 30 days, 14.9% year to date and 20.4% over 1 year, which provides a useful snapshot of how the market has been pricing it recently.
• Recent headlines have focused on Energy Transfer's role in North American energy infrastructure and its position in the broader oil and gas space. This helps frame how investors think about its long term relevance. Coverage has also highlighted how pipeline operators can be sensitive to sentiment around energy demand and regulation, giving context to ongoing shifts in risk perception.
• Energy Transfer currently has a valuation score of 4/6. The sections that follow compare different valuation approaches before finishing with a broader way to think about what that score may mean for your investment decision.

Find out why Energy Transfer's 20.4% return over the last year is lagging behind its peers.

Approach 1: Energy Transfer Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a business could be worth by projecting its future cash flows and discounting them back to today to reflect time and risk.

For Energy Transfer, the model uses a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow stands at about $5.4b. Analyst and extrapolated projections then extend this out over the next decade, with the model pointing to free cash flow of $7.2b in 2030. Beyond the explicit analyst window, Simply Wall St extrapolates cash flows using modest growth assumptions, which is common practice when building longer term projections.

Bringing all of those projected cash flows back to today produces an estimated intrinsic value of US$45.93 per unit. Against a recent unit price of about US$19.07, the DCF output suggests a 58.5% discount, which points to Energy Transfer trading well below this model’s estimate of its underlying value.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Energy Transfer is undervalued by 58.5%. Track this in your watchlist or portfolio, or discover 61 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 Energy Transfer.

Approach 2: Energy Transfer Price vs Earnings

For a profitable company like Energy Transfer, the P/E ratio is a useful shorthand for how much investors are paying for each dollar of earnings. This helps you compare it quickly with other profitable businesses.

What counts as a “normal” P/E depends on how the market views a company’s growth prospects and risk. Higher growth or lower perceived risk often support a higher multiple, while slower growth or higher perceived risk usually line up with a lower one.

Energy Transfer currently trades on a P/E of 15.72x, compared with the Oil and Gas industry average of about 15.06x and a peer group average of 19.15x. Simply Wall St’s Fair Ratio for Energy Transfer is 28.25x. This Fair Ratio is a proprietary estimate of what the P/E might be, given factors such as the company’s earnings growth profile, industry, profit margins, market cap and risk characteristics.

Because the Fair Ratio folds in these company specific factors, it can be more informative than a simple comparison with peers or the broad industry. With the current P/E of 15.72x sitting well below the Fair Ratio of 28.25x, this framework points to Energy Transfer trading at a discount on an earnings basis.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Energy Transfer Narrative

Earlier it was mentioned that there is an even better way to think about valuation, and on Simply Wall St that comes through Narratives. In this approach you set out your story for Energy Transfer, link that story to explicit forecasts for revenue, earnings and margins, arrive at your own fair value, then easily compare it with the current price on the Community page. The framework updates as new news or earnings arrive. For example, one investor might focus on expanding gas projects and use the higher US$25 analyst target in their Narrative, while another might concentrate on execution and regulatory risks and lean toward the lower US$18.5 target. This produces two clear, data backed stories for the same units.

Do you think there's more to the story for Energy Transfer? 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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