• If you are wondering whether Targa Resources is still reasonably priced after its strong run, this article will walk through what the current market price might be implying about the company.
• The stock last closed at US$223.89, with returns of 5.9% over 7 days, 20.8% over 30 days, 19.9% year to date, 11.6% over 1 year and a very large gain over 5 years that is close to 7x.
• Recent interest in Targa Resources has been supported by ongoing attention on US midstream energy companies and their role in supporting production and exports. Broader sector news, including capital allocation decisions and infrastructure investment plans across peers, helps frame why investors may be reassessing risk and potential rewards.
• On our checklist-based valuation model, Targa Resources currently scores 2 out of 6 for being undervalued. Next we will compare different valuation approaches, then finish with a practical way to tie these numbers into a fuller view of the stock.

Targa Resources scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Targa Resources Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model projects a company’s future cash flows and then discounts them back to today’s dollars to estimate what the business might be worth right now.

For Targa Resources, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $874.1 million. Analyst and extrapolated projections suggest free cash flow could reach $3.0 billion in 2030, with a path that includes estimates such as $887.5 million in 2026 and a $2.9 billion range in the early 2030s, all in dollar terms. Simply Wall St discounts each of these projected cash flows back to today using its own assumptions to arrive at a per share estimate.

On this basis, the DCF model points to an estimated intrinsic value of about $280.80 per share for Targa Resources, compared with the recent share price of $223.89. That implies the stock is around 20.3% below the DCF estimate of fair value.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Targa Resources is undervalued by 20.3%. Track this in your watchlist or portfolio, or discover 53 more high quality undervalued stocks.

Approach 2: Targa Resources Price vs Earnings

For a profitable company like Targa Resources, the P/E ratio is a straightforward way to see how much investors are paying for each dollar of earnings. Higher growth expectations and lower perceived risk usually justify a higher P/E, while slower growth or higher risk tend to line up with a lower, more conservative P/E.

Targa Resources is currently trading on a P/E of 29.75x. That sits well above the Oil and Gas industry average P/E of 14.46x and also above the peer average of 15.52x. Simply Wall St’s Fair Ratio framework estimates what a more tailored P/E might look like for Targa Resources, given factors such as its earnings growth profile, industry, profit margins, market cap and specific risks, and arrives at a Fair Ratio of 23.11x.

This Fair Ratio is designed to be more useful than a simple industry or peer comparison because it adjusts for company specific characteristics rather than assuming one size fits all. Comparing the Fair Ratio of 23.11x with the actual P/E of 29.75x suggests the shares are priced above what this model would consider a more neutral level.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Targa Resources Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, which are simply your story about Targa Resources translated into assumptions for future revenue, earnings and margins. These are then linked to a fair value estimate that you can compare with today’s price, all within an easy tool on Simply Wall St’s Community page that millions of investors use. The tool keeps updating as new news or earnings come in. For example, one investor might build a bullish Targa Resources Narrative around higher Permian volumes, expanding export infrastructure and a fair value near the upper analyst price target of US$240.0. Another might create a more cautious Narrative focused on competition, overbuild risk and regulation with a fair value closer to the US$186.0 lower analyst target. This gives you a clear, numbers-based way to decide how your own fair value stacks up against the live share price.

Do you think there's more to the story for Targa Resources? 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.