NGL Energy Partners (NGL) stock was recently in focus after a 5.6% move that followed record Water Solutions volumes in the Permian Basin and new balance sheet actions, including refinancing, debt reduction, and a repurchase program.

Despite the recent 5.6% jump on record Water Solutions volumes and balance sheet moves, NGL Energy Partners’ near term momentum has cooled, with a 1 month share price return down 11.15%. However, the 1 year total shareholder return is very large and the 5 year total shareholder return is more than 5x.

If you are looking beyond NGL Energy Partners for other opportunities tied to energy infrastructure and electrification, now could be a good time to review 34 power grid technology and infrastructure stocks

With NGL Energy Partners stock up strongly over the past year, but a loss of $444.898 million and an intrinsic discount reading suggesting potential overvaluation, is the recent strength a buying opportunity, or is the market already pricing in future growth?

Preferred Price to Sales Multiple of 0.6x: Is it justified?

NGL Energy Partners currently trades on a P/S ratio of 0.6x, which looks inexpensive next to peers but screens as expensive relative to its estimated fair P/S level.

The P/S ratio compares the company’s market value to its revenue and is often used for businesses that are not yet profitable. NGL Energy Partners reported a loss of $444.898 million on revenue of $3,156.159 million. For this stock, the P/S figure helps indicate what the market is paying for each dollar of current sales while earnings remain negative.

Relative to similar companies in the US Oil and Gas industry, NGL Energy Partners’ 0.6x P/S is far below the industry average of 1.9x and also below the broader peer average of 2.7x. This suggests the stock trades at a sizable discount to comparable energy infrastructure businesses on a sales basis. However, compared with an estimated fair P/S ratio of 0.4x, the current multiple is above the level that the fair ratio model points to as a potential anchor. This introduces a tension between peer comparisons and that fair value benchmark.

Result: Price-to-sales ratio of 0.6x (OVERVALUED)

However, investors also need to weigh NGL Energy Partners’ recent loss of $444.898 million and the intrinsic discount reading, which points to possible overvaluation risk.

Another View on NGL Energy Partners Using the SWS DCF Model

While the P/S ratio suggests NGL Energy Partners looks cheap next to peers, the SWS DCF model points the other way. With the stock at $15.85 and the DCF value at $11.50, the shares screen as overvalued on future cash flows. This raises the question of which signal should carry more weight for you.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out NGL Energy Partners for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 44 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Seeing mixed signals on NGL Energy Partners and unsure what to make of them? Take a closer look at the full picture for yourself, weighing both the concerns and potential upside highlighted by our 1 key reward and 1 important warning sign

Looking for more investment ideas beyond NGL Energy Partners?

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• Target potential standouts trading below what their quality might suggest by reviewing 44 high quality undervalued stocks and see which stocks currently meet those criteria.
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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.