• If you are wondering whether NGL Energy Partners is still attractively priced after its strong run, the starting point is understanding what the current unit price actually reflects.
• The stock closed at US$15.99, and while it is down about 3.3% over the past week and 9.3% over the past month, it is still up 61.5% year to date and 242.4% over the last year, with a very large 5 year return that is around 7x.
• Recent coverage has focused on NGL Energy Partners as investors reassess the partnership after this sharp multi year move and the significant gains seen over the last 12 months. This backdrop helps explain why some holders are locking in profits while others are reassessing whether the current price still matches their view of long term value.
• On Simply Wall St's 6 point valuation framework, NGL Energy Partners currently records a valuation score of 2. This means it screens as undervalued on two of six checks. The next sections will compare different valuation methods before closing with a more holistic way to think about what the stock might be worth.

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

Approach 1: NGL Energy Partners Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what NGL Energy Partners might be worth today by projecting its future cash flows and discounting them back to a present value. It focuses on the cash the business could generate for equity holders rather than accounting earnings.

For NGL Energy Partners, the latest reported Free Cash Flow is about $184.6 million. Analyst estimates and extrapolations used in Simply Wall St's 2 Stage Free Cash Flow to Equity model include a projected Free Cash Flow of $132.7 million in the year to March 2028, with additional projections extending out to 2035. Cash flows beyond the explicit analyst horizon are extrapolated rather than directly forecast by analysts.

When all these projected cash flows are discounted back to today, the model arrives at an estimated intrinsic value of about $11.54 per unit. Compared with the recent unit price of $15.99, this implies the units trade at roughly a 38.6% premium to the DCF estimate, which indicates the stock currently screens as overvalued on this metric.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests NGL Energy Partners may be overvalued by 38.6%. Discover 45 high quality undervalued stocks or create your own screener to find better value opportunities.

Approach 2: NGL Energy Partners Price vs Sales

For a partnership like NGL Energy Partners, using the P/S ratio can be useful because it focuses on how much investors are paying for each dollar of revenue, regardless of where earnings currently sit. It also helps you compare stocks that may be at different points in their profitability cycle.

In general, investors tend to accept a higher or lower P/S multiple depending on what they expect for future growth and how much risk they see in the business. Higher expected growth and lower perceived risk can support a higher “normal” multiple, while slower growth or higher risk can justify a lower one.

NGL Energy Partners currently trades on a P/S ratio of 0.63x. This is below the Oil and Gas industry average P/S of 1.82x and below the peer average of 2.69x. Simply Wall St’s “Fair Ratio” for NGL Energy Partners is 0.43x, which is a proprietary estimate of what a reasonable P/S might be given factors such as its earnings growth profile, industry, profit margins, market cap and risk characteristics. Because this Fair Ratio incorporates those company specific drivers, it gives a more tailored view than a simple comparison with peers or the broader industry.

With the actual P/S of 0.63x versus a Fair Ratio of 0.43x, NGL Energy Partners currently screens as overvalued on this metric.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your NGL Energy Partners Narrative

Earlier it was mentioned that there is a better way to understand what NGL Energy Partners might be worth, and that is through Narratives, which let you attach a simple story to your numbers, such as your fair value estimate and your expectations for future revenue, earnings and margins.

A Narrative connects three pieces: what you believe about the company, the financial forecast that follows from that belief, and the fair value that drops out of those assumptions.

On Simply Wall St’s Community page, Narratives are an easy tool that millions of investors use to set out these assumptions, compare their Fair Value to the current unit price to help decide whether NGL Energy Partners looks attractive or stretched, and then see those views update automatically when new news or earnings are added to the platform.

For example, one NGL Energy Partners Narrative on the Community page might set a relatively low fair value based on cautious revenue and margin assumptions, while another might assign a much higher fair value based on more optimistic expectations. This illustrates how different investors can reasonably see very different opportunities in the same stock.

Do you think there's more to the story for NGL Energy Partners? 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.