• Wondering whether ONE Gas at around US$82.50 is offering good value right now, or whether the recent price leaves limited upside.
• The stock is up 14.6% over the past year and 6.6% year to date, even though it has slipped 4.5% over the last month and was roughly flat over the past week with a 0.2% return.
• Recent news coverage has focused on ONE Gas as a regulated utility that investors often look to for income and stability. This helps frame how the stock trades compared to faster growing sectors. Commentators have also highlighted ongoing interest in gas utilities as part of wider discussions about US energy infrastructure and reliability.
• Despite that backdrop, ONE Gas currently scores 0 out of 6 on our valuation checks. The next sections will walk through standard valuation methods, then finish with a broader way to think about what this price really implies.

ONE Gas scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: ONE Gas Dividend Discount Model (DDM) Analysis

The Dividend Discount Model looks at the value of a stock by projecting future dividends and discounting them back to today. It is most useful for companies where dividends are a key part of the investment case, which is often true for regulated utilities like ONE Gas.

For ONE Gas, the model uses a current annual dividend of about $2.80 per share, a return on equity of 8.24% and a payout ratio of 62.32%. That implies an expected dividend growth rate of about 3.1%, calculated from the part of earnings that is retained and reinvested. The focus here is on whether those dividends can be maintained and grow steadily rather than on near term earnings swings.

Putting these inputs together, the DDM output suggests an intrinsic value of roughly $69.90 per share. Compared with the recent share price around $82.50, the model implies the stock is about 18.0% above this dividend based estimate of value.

Result: OVERVALUED

Our Dividend Discount Model (DDM) analysis suggests ONE Gas may be overvalued by 18.0%. Discover 49 high quality undervalued stocks or create your own screener to find better value opportunities.

Approach 2: ONE Gas Price vs Earnings

For a profitable company like ONE Gas, the P/E ratio is a straightforward way to think about what you are paying for each dollar of earnings. Investors usually accept a higher or lower P/E depending on what they expect for future earnings growth and how risky those earnings appear.

ONE Gas currently trades on a P/E of 18.93x. That sits above the Gas Utilities industry average of about 14.35x and the peer average of 14.38x. On those simple comparisons, the stock is pricing in a higher valuation than many sector peers.

Simply Wall St’s Fair Ratio for ONE Gas comes in slightly lower at 18.71x. This is a proprietary estimate of what a reasonable P/E might look like after considering factors such as earnings growth, industry, profit margins, market cap and risk profile. Because it blends these company specific drivers, it can give a more tailored reference point than broad peer or industry averages alone.

Comparing the Fair Ratio of 18.71x with the current P/E of 18.93x shows only a small gap, which points to the stock being priced close to that model based estimate.

Result: ABOUT RIGHT

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Upgrade Your Decision Making: Choose your ONE Gas Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Meet Narratives, where you set out a clear story for ONE Gas, link that story to your own revenue, earnings and margin assumptions, and the Simply Wall St platform on the Community page turns it into a fair value that you can compare with the current price. You can keep this updated as new news or earnings arrive, and see how different views line up. For example, one investor might build a Narrative that supports a US$105.00 fair value based on confidence in long term growth and regulation, while another might use the same tools to arrive at US$78.00 with more caution around spending, regional exposure and policy risk.

Do you think there's more to the story for ONE Gas? 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.