• If you are wondering whether USA Compression Partners at US$29.67 is offering good value or asking too much, the recent share performance gives you plenty to think about.
• The stock has returned 8.2% over the past week, 11.8% over the last month, 24.7% year to date and 33.3% over the past year, with a 3 year return of 96.4% and a very large 5 year gain of 210.8%.
• Recent coverage has focused on USA Compression Partners as part of broader discussions around US energy infrastructure and income focused stocks. This helps explain why the price has been in the spotlight. Investors have been paying close attention to how stable cash generation and distribution policies might influence sentiment around the partnership.
• USA Compression Partners currently holds a valuation score of 0 out of 6. The next sections will compare different valuation approaches and then finish with a way to assess value that goes beyond a single score.

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 model estimates what a stock could be worth by projecting future cash flows and discounting them back to today, using a required rate of return.

For USA Compression Partners, the model uses a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is $226.71 million. Analysts provide explicit forecasts for the next few years, and Simply Wall St then extends these to a full 10 year path, with projected free cash flow of $246.86 million in 2035, discounted to today at $111.47 million.

Bringing all of those discounted cash flows together produces an estimated intrinsic value of $25.84 per unit. Compared with the current price of $29.67, the DCF suggests the units trade at roughly a 14.8% premium to this estimate, which indicates that the stock may be overvalued on this model.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests USA Compression Partners may be overvalued by 14.8%. Discover 51 high quality undervalued stocks or create your own screener to find better value opportunities.

Approach 2: USA Compression Partners Price vs Earnings

For a profitable company, the P/E ratio is a useful yardstick because it links what you pay directly to the earnings the business is currently generating. Investors usually accept a higher or lower P/E based on what they expect for future growth and the level of risk, so there is no single “right” number, only a range that tends to make sense for a given stock.

USA Compression Partners currently trades on a P/E of 34.34x. That sits above both the Energy Services industry average P/E of 26.59x and the peer group average of 24.82x, which implies the market is willing to pay more for each dollar of its earnings than for many comparable stocks.

Simply Wall St’s Fair Ratio for USA Compression Partners is 25.55x. This is a proprietary estimate of what the P/E might be, given factors such as the company’s earnings profile, industry, profit margins, market cap and risk characteristics. Because it incorporates these company specific inputs rather than relying only on broad peer or industry comparisons, the Fair Ratio can offer a more tailored reference point. Comparing the current P/E of 34.34x with the Fair Ratio of 25.55x suggests the units trade at a richer level than this framework would indicate.

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. Narratives on Simply Wall St let you connect your view of USA Compression Partners to a set of revenue, earnings and margin forecasts. For example, you might choose a story focused on tight capacity, LNG growth and margin stability that supports a higher fair value closer to US$33.00, or a more cautious view that highlights customer concentration, cost pressures and long term demand risks that anchors fair value nearer to US$26.00. You can then compare the resulting fair value with the current price, and see that view update automatically as fresh news or earnings arrive, all within an easy to use Community page that millions of investors access to decide whether a stock looks priced above or below their own assumptions.

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.