Viper Energy stock overview
Viper Energy (VNOM) has attracted attention after recent trading, with the share price closing at $46.47 and showing mixed short term returns, including a 2.36% move over the past day and 6.46% over the past month.
See our latest analysis for Viper Energy.
That 2.36% 1 day share price return comes after a 6.46% 30 day share price return and 19.83% year to date share price return. The 1 year total shareholder return sits at 30.36%, suggesting momentum has been building over recent months.
If this kind of move has you watching energy names more closely, it could be a good moment to broaden your search with 93 nuclear energy infrastructure stocks
With Viper Energy showing double digit recent returns, a value score of 3 and trading about 17% below the average analyst price target, you have to ask: is this a genuine mispricing, or is the market already baking in future growth?
Most Popular Narrative: 45.2% Overvalued
The most followed narrative values Viper Energy at $32.00 per share, well below the last close at $46.47, which puts a clear spotlight on why some investors see the current price as rich.
This is one of three major benefits the company brings to the table: As I just briefly explained, the company has a high-margin business model, as it does not incur drilling costs. The Permian is home to almost half of all onshore horizontal rigs in the United States. Essentially, it is the place to be for oil and gas production with elevated reserves and low breakeven prices. In a recent article, I showed the chart below. As we can see, the Permian has mostly undeveloped wells, which bodes well for future production. ImageBloomberg Related to the second advantage, the Permian also benefits from decent infrastructure, a favorable regulatory environment, and lower operational risks compared to emerging basins. Nonetheless, because of elevated production, more infrastructure is needed in the years ahead, which is one of the reasons why I am also very bullish on the midstream industry.
According to Idle, the valuation leans heavily on premium margins, steady revenue expansion and a future earnings multiple more often associated with faster growing sectors.
Result: Fair Value of $32.00 (OVERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, still keep an eye on execution risks in the Permian and the fact that Viper currently reports a net loss of $69.0m on $1.325b revenue.
Find out about the key risks to this Viper Energy narrative.
Another view: DCF suggests a very different story
Idle’s fair value of $32.00 paints Viper Energy as 45.2% overvalued, but our DCF model lands much higher at $129.72 per share, which is 64.2% above the current $46.47 price. When two methods are this far apart, which one would you lean on?
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 Viper Energy 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 59 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 such a split view on fair value and sentiment, it helps to go straight to the source data, compare both sides, and decide quickly where you stand by reviewing the 2 key rewards and 2 important warning signs.
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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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