Why Cheniere Energy Partners stock is on investors’ radar

Cheniere Energy Partners (CQP) has drawn fresh attention as investors weigh recent unit price moves, with a modest decline over the past week set against a positive total return over the past 3 years.

With units recently closing at US$61.25 and year to date total return in positive territory, investors are effectively looking at a business tied closely to global liquefied natural gas demand through its Sabine Pass export facility and related pipeline assets.

The recent 1 day and 7 day share price declines sit against a 90 day share price return of 8.85% and a 3 year total shareholder return of 63.36%. This suggests that longer term momentum remains stronger than very recent trading.

If you are comparing Cheniere Energy Partners with other energy related ideas, it can help to scan the wider market using a curated list of nuclear energy infrastructure names such as the 93 nuclear energy infrastructure stocks

With solid multi year total returns, a value score of 3 and units trading slightly above the average analyst price target, the key question is whether CQP still trades at a discount or if the market already prices in future growth.

Preferred P/E of 11.8x: Is it justified?

CQP trades on a P/E of 11.8x, which sits alongside a last close of $61.25 and positions the partnership at a lower earnings multiple than many peers.

The P/E ratio compares the unit price to earnings per unit, so it gives you a quick sense of how much investors are paying for each dollar of current profit. For a mature LNG infrastructure business with established contracts and meaningful debt on the balance sheet, earnings based measures are often a focal point because cash flows and profits are tied to long term commercial agreements rather than rapid volume swings.

On the numbers provided, CQP appears to be trading at relatively low value metrics compared with several reference points. Its 11.8x P/E is below the US Oil and Gas industry average of 14.8x, below the peer group average of 17.3x, and below an estimated fair P/E of 20.7x that the market could move towards if sentiment and expectations aligned with that benchmark. Explore the SWS fair ratio for Cheniere Energy Partners

Result: Price-to-Earnings of 11.8x (VALUATION APPEARS LOW RELATIVE TO REFERENCES)

However, investors still need to watch for pressures on net income, which currently reflects an annual decline of about 3%, as well as the reliance on a single LNG terminal and pipeline system.

Another view: DCF sends a very different signal

While the P/E of 11.8x points to CQP looking inexpensive against peers and a higher fair ratio, the SWS DCF model tells a sharply different story. With the units at $61.25 versus an estimated future cash flow value of $2.44, the model points to CQP trading well above that DCF output. This raises a simple question: which signal do you trust more for your own process?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Cheniere 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 59 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

With sentiment mixed across valuation signals, it helps to move quickly, review the full data set for yourself, and form your own view using the 3 key rewards and 3 important warning signs.

Looking for more investment ideas?

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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.