- If you are wondering whether Viper Energy's current share price offers value or just noise, this article breaks down what the numbers are really saying about the stock.
- The share price recently closed at US$47.85, with returns of 2.8% over 30 days, 23.4% year to date and 14.3% over the last year.
- Recent coverage has focused on Viper Energy as an Oil and Gas name that some investors watch for both income and growth potential. This can influence how price moves are interpreted. Evergreen interest in the company often centers on how its asset base and capital returns policy fit into a longer term energy thesis.
- Viper Energy currently has a valuation score of 3 out of 6. The sections that follow will compare different valuation methods and then finish with a broader way to think about what this score really means for you.
Find out why Viper Energy's 14.3% return over the last year is lagging behind its peers.
Approach 1: Viper Energy Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model takes projected future cash flows and discounts them back to today to estimate what the entire business could be worth in present dollar terms.
For Viper Energy, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month free cash flow is a loss of $744.61 million, so the focus here is less on recent cash generation and more on what analysts and projections suggest for the years ahead.
Analyst and extrapolated estimates have free cash flow reaching $1.87 billion by 2030, with annual projections between 2026 and 2035 ranging from roughly $1.64 billion to $2.24 billion before discounting. Simply Wall St discounts these projected cash flows back to today to arrive at an estimated intrinsic value of $129.72 per share.
Compared with the recent share price of $47.85, this DCF output implies the stock is about 63.1% undervalued based on these cash flow assumptions and discounting inputs.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Viper Energy is undervalued by 63.1%. Track this in your watchlist or portfolio, or discover 62 more high quality undervalued stocks.
Approach 2: Viper Energy Price vs Sales
For profitable and revenue generating companies, the price to sales, or P/S, ratio is a useful way to see how much investors are paying for each dollar of revenue. It is particularly helpful when earnings or free cash flow are uneven, as it ties valuation directly to the top line rather than profit swings.
What counts as a "normal" P/S ratio depends on how investors view a company’s growth prospects and risk profile. Higher expected growth or perceived resilience can justify a higher multiple, while higher risk or weaker sentiment usually points to a lower one.
Viper Energy currently trades on a P/S ratio of 6.38x. That is above both the Oil and Gas industry average of 2.10x and a peer group average of 2.30x. Simply Wall St also calculates a proprietary "Fair Ratio" of 8.12x for Viper Energy, which reflects factors such as its growth profile, profit margins, industry, market cap and risk characteristics. This tailored Fair Ratio can be more informative than a simple peer or industry comparison because it adjusts for company specific strengths and weaknesses. With the current P/S of 6.38x sitting below the Fair Ratio of 8.12x, the shares screen as undervalued on this metric.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Viper Energy Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives are a simple way for you to attach a clear story about Viper Energy to the numbers, link that story to a forecast for revenue, earnings and margins, and then see a fair value that you can compare with the current share price to decide whether the stock looks attractive or expensive.
On Simply Wall St’s Community page, Narratives are available as an accessible tool used by millions of investors. They update automatically as new news, earnings and guidance are added, so your view does not stay frozen while the data moves.
For Viper Energy, one investor might build a more cautious Narrative around a fair value of about US$32.00 based on assumptions of more moderate growth and risk. Another might lean toward a fair value around US$63.09 that reflects expectations for stronger earnings power. Each of these Narratives then shows at a glance whether that fair value sits above or below the current price and how that gap changes as new information arrives.
For Viper Energy however we'll make it really easy for you with previews of two leading Viper Energy Narratives:
Fair value: US$53.41 per share
Gap to this fair value: about 10.4% below that estimate based on the recent US$47.85 share price
Revenue growth assumption: 16.89% a year
- Focuses on the Sitio Royalties acquisition, automation and a larger royalty footprint as key supports for future revenue, margins and scale.
- Highlights Viper Energy’s concentration in U.S. Permian Basin royalties, alignment with Diamondback and a policy of returning excess cash through dividends and buybacks following a US$1.5b net debt target.
- Flags risks around reliance on third party operators, concentration in a single region, execution on acquisitions and asset sales, and long term ESG and regulatory pressures.
Fair value: US$32.00 per share
Gap to this fair value: about 49.2% above that estimate based on the recent US$47.85 share price
Revenue growth assumption: 11.3% a year
- Emphasizes Viper Energy’s royalty model, which collects income without drilling costs and is tied to activity levels in the Permian Basin.
- Points to the Permian as a major U.S. oil and gas hub with large undeveloped reserves, low breakeven levels and supportive infrastructure and regulation.
- Notes that ongoing high production requires further infrastructure build out, which can influence how investors weigh the risk and reward trade off in the region.
Do you think there's more to the story for Viper Energy? 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.
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