New 52-week high puts NGL Energy Partners (NGL) in focus

NGL Energy Partners (NGL) recently reached a new 52-week high of $18.72, drawing attention to how investors are weighing its debt load alongside financial metrics that indicate operational efficiency.

The fresh 52-week high comes after a strong run, with a 30-day share price return of 24.72% and a 90-day share price return of 51.17%. The 1-year total shareholder return is very large and points to momentum that has built over both shorter and longer periods.

If this kind of move has you thinking about what else could be gaining traction in energy infrastructure, it might be worth checking out 35 power grid technology and infrastructure stocks

With NGL Energy Partners now sitting near its 52-week high and trading at roughly a 5% discount to one estimate of intrinsic value, investors may need to consider whether this is still an overlooked opportunity or if the market is already pricing in future growth.

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

NGL Energy Partners is trading on a P/S ratio of 0.6x, which sits below the US Oil and Gas industry average of 2.1x but above the estimated fair P/S level of 0.4x suggested by the SWS model.

The P/S multiple compares the company’s market value to its revenue, so it is useful when earnings are negative, as is the case for NGL Energy Partners, which recently reported a net loss of $33.63m on revenue of $3,525.45m.

Against this backdrop, a P/S of 0.6x indicates the market is attributing more value to each dollar of NGL Energy Partners' sales than the fair ratio implies. However, it still remains much lower than the broader industry and peer averages, which the SWS framework suggests could be an area the market reassesses over time.

Compared with the US Oil and Gas industry average P/S of 2.1x and a peer average of 2.9x, NGL Energy Partners screens as materially lower on a sales based multiple. At the same time, the SWS fair P/S estimate of 0.4x points to a level the valuation could move toward if expectations moderate.

Result: Preferred multiple of Price-to-Sales of 0.6x (OVERVALUED)

However, the recent annual revenue decline and the partnership’s net loss of $33.63m could still challenge the current momentum if sentiment around earnings or cash flow weakens.

Another way to look at NGL Energy Partners' value

While the P/S ratio of 0.6x looks expensive versus the 0.4x fair ratio, our DCF model shows NGL Energy Partners trading about 5.2% below its estimated future cash flow value of roughly $19.11 per unit. This suggests the current price is closer to a discount than a premium.

That split view between sales-based and cash-flow-based pricing leaves a simple question for you: which lens do you trust more for a business like this?

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 49 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 clearly mixed but interest rising, this is the moment to look through the numbers yourself and decide how you feel about the setup, then take a closer look at the 3 key rewards

Looking for more investment ideas?

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• Target potential mispricings by scanning 49 high quality undervalued stocks that combine quality fundamentals with a share price that may not fully reflect them yet.
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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.