• If you are trying to figure out whether HF Sinclair at around US$61.80 still offers value, the recent share performance gives you plenty to think about.
• The stock has returned 6.8% over the last 7 days, a 31.9% gain year to date, and 110.4% over the past year, with a 3.0% decline across the last 30 days and longer term returns of 60.0% over 3 years and 95.7% over 5 years.
• Recent coverage has focused on HF Sinclair's positioning in the energy sector and how the company is responding to industry shifts and capital allocation priorities. This backdrop helps explain why investors may be reassessing both its growth potential and its risk profile.
• Simply Wall St currently assigns HF Sinclair a valuation score of 4 out of 6. The rest of this article will walk through the key valuation methods behind that score, then finish with a way to interpret valuation that goes beyond the numbers alone.

Approach 1: HF Sinclair Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business could be worth by projecting its future cash flows and then discounting those back to today using a required rate of return. It focuses on the cash that could ultimately be available to shareholders.

For HF Sinclair, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is around $914.2 million. Analyst inputs and subsequent extrapolations point to projected free cash flow of about $1.18 billion in 2035, with interim projections such as $1.19 billion in 2026 and $1.11 billion in 2027, all in $ terms.

When these cash flows over the next decade are discounted back and combined with a terminal value, the DCF model arrives at an estimated intrinsic value of about $139.84 per share. Compared with the current share price of around $61.80, this implies the stock is 55.8% undervalued under these assumptions.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests HF Sinclair is undervalued by 55.8%. Track this in your watchlist or portfolio, or discover 53 more high quality undervalued stocks.

Approach 2: HF Sinclair Price vs Earnings

For a profitable company like HF Sinclair, the P/E ratio is a useful way to relate what you are paying for each share to the earnings the business is currently generating. In general, higher growth expectations and lower perceived risk tend to support a higher P/E, while lower growth expectations or higher risk usually go with a lower P/E.

HF Sinclair currently trades on a P/E of 19.41x. That sits above the Oil and Gas industry average P/E of 14.90x, and below the broader peer group average of 43.66x. Simply Wall St’s Fair Ratio for HF Sinclair is 20.27x, which is its proprietary estimate of what a “normal” P/E could look like for this company given factors such as earnings growth characteristics, profit margins, industry, market cap and identified risks.

This Fair Ratio can be more tailored than a simple industry or peer comparison because it attempts to adjust for HF Sinclair’s own profile rather than applying a broad sector rule of thumb. With the current P/E of 19.41x sitting close to the Fair Ratio of 20.27x, the shares appear to be priced at roughly a reasonable level on this metric.

Result: ABOUT RIGHT

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Upgrade Your Decision Making: Choose your HF Sinclair Narrative

Earlier it was mentioned that there is an even better way to think about valuation. On Simply Wall St that starts with Narratives, which let you set out your own story for HF Sinclair by linking assumptions about its future revenue, earnings, margins and fair value to a clear forecast that is easy to compare with today’s share price.

A Narrative is your view of how the business develops, written as a short story and paired with numbers. Instead of only seeing a DCF or P/E, you also see why you expect HF Sinclair to perform a certain way and what that implies for a fair value estimate.

On the Simply Wall St Community page, Narratives are available as a simple tool used by millions of investors. They help you see at a glance whether your fair value sits above or below the current price and therefore whether the stock looks expensive or cheap on your assumptions, without needing to build a full model yourself.

Because Narratives update when new information such as earnings, news or guidance is added to the platform, you can see different viewpoints side by side. For example, you might see one HF Sinclair Narrative that points to a fair value of about US$55.16 and another closer to US$70.00, and then decide which story, and which set of numbers, you find more reasonable for your own decision making.

For HF Sinclair however we will make it really easy for you with previews of two leading HF Sinclair Narratives:

Fair value in this bullish Narrative: about US$98.48 per share.

Price gap versus that fair value: around 37% below the Narrative fair value, based on the current price of US$61.80.

Revenue growth assumption: 5% a year.

• Views HF Sinclair as trading below a DCF based fair value, with the gap linked to recent revenue pressure, margin compression and concerns around dividend coverage.
• Highlights mixed signals on fundamentals and analyst sentiment, and points to projected earnings growth, balance sheet metrics and valuation ratios that together indicate possible undervaluation.
• Flags sector volatility, energy transition risks and dividend sustainability as important watchpoints. The investment case depends on earnings growth and a move closer to estimated fair value.

Fair value in this bearish Narrative: about US$55.16 per share.

Price gap versus that fair value: around 12% above the Narrative fair value, based on the current price of US$61.80.

Revenue growth assumption: 0.66% decline a year.

• Frames HF Sinclair as heavily tied to traditional fuels, with concerns around electric vehicle adoption, tighter environmental rules and high capital needs that could affect long term earnings.
• Builds in fairly flat revenue, modest margin improvement and a future P/E of about 14.5x to reach a fair value close to US$55 per share, slightly below the recent market price.
• Notes that stronger performance from Midstream and Lubricants, disciplined capital spending and continued cash returns to shareholders could challenge this cautious view.

Do you think there's more to the story for HF Sinclair? 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.