NGL Energy Partners (NGL) is in focus after announcing the LEX II Extension to its Lea County Express Pipeline System, a new $100 million unit repurchase program, and a $950 million senior secured term loan facility.

At a share price of $15.42, NGL Energy Partners has seen a 1-year total shareholder return of very roughly 2.6x and a 90-day share price return of 16.29%. This suggests strong momentum that the latest pipeline expansion, unit repurchase plan, and term loan facility may be reinforcing.

If you are looking beyond NGL Energy Partners for other infrastructure related ideas in the market, it could be worth scanning 35 power grid technology and infrastructure stocks

After a very strong run and with a new pipeline project plus capital actions in progress, the key question for NGL Energy Partners is whether the recent move has already done the heavy lifting on valuation or if there is still meaningful upside ahead.

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

NGL Energy Partners is trading on a P/S of 0.6x, and based on Simply Wall St’s fair ratio work, that level looks rich relative to its own fundamentals.

The P/S multiple compares the company’s market value to its revenue. It is often used for capital intensive energy infrastructure businesses where earnings can be volatile or currently negative. For NGL Energy Partners, this lens matters because the partnership is still loss making, with reported revenue of $3.16b and a net loss of $444.90m.

The stock’s current P/S of 0.6x is described as good value when set against the broader US Oil and Gas industry average of 1.8x and a peer group average of 2.6x. However, the SWS fair P/S ratio for NGL Energy Partners is estimated at 0.4x, which is materially lower than where the market is pricing the units today. This suggests a level the market could potentially move toward if sentiment cools.

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

However, NGL Energy Partners still carries risks, including ongoing net losses of $444.90m and revenue that recently declined 33.50%. These factors could challenge the current valuation story.

Another View on NGL Energy Partners: Our DCF Model

There is a different signal when you look at NGL Energy Partners through the SWS DCF model. With the units at $15.42 and an estimated future cash flow value of $12.47, the stock screens as overvalued on this approach, which raises the question of how much optimism is already in the price.

For a closer look at how this cash flow view is built, and what might shift it over time, Look into how the SWS DCF model arrives at its fair value.

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 45 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 mixed signals across NGL Energy Partners on valuation, sentiment and fundamentals, this is a moment to act quickly and test the data for yourself by weighing both the upside potential and the issues that could hold the units back, then zero in on the 1 key reward and 1 important warning sign.

Looking for more investment ideas beyond NGL Energy Partners?

If you are serious about building a stronger portfolio alongside NGL Energy Partners, use the Simply Wall St screener tools to uncover opportunities you might otherwise miss.

• Target potential bargains by scanning 45 high quality undervalued stocks that combine quality with attractive pricing before the crowd catches on.
• Prioritise resilience by checking 74 resilient stocks with low risk scores that score well on stability and downside protection.
• Spot under-the-radar opportunities through the screener containing 18 high quality undiscovered gems that pair solid fundamentals with limited market attention.

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.