Kinder Morgan has delivered a powerful run over the past several years, and recent headlines around new pipeline spending have kept the story front and center. With the stock now around US$33.87, the question is how well that performance lines up with the cash flows the business is expected to generate.
- Shares have returned about 157.7% over the past 5 years, which puts real weight on whether the current valuation still lines up with Kinder Morgan's underlying cash generation.
- The newly approved US$4.7b of U.S. natural gas pipeline projects may support future earnings and cash flow, but it also commits Kinder Morgan to substantial upfront investment that will take years to turn into cash returns.
- If you'd rather focus on earnings, this one's for you. See why Kinder Morgan's 21.0x P/E tells a different valuation story.
For investors, the debate is whether Kinder Morgan's present share price is adequately supported by the cash flows implied in its intrinsic value estimate from the Discounted Cash Flow (DCF) approach.
If you want a wider starting list alongside Kinder Morgan, consider using a focused stock screen of 29 high quality undervalued stocks.
Is Kinder Morgan Still Cheap on Cash Flow?
The Discounted Cash Flow (DCF) model here focuses on the cash Kinder Morgan can return to shareholders over time. Latest twelve month free cash flow sits around $2.26b, and the projections used in the model assume that this figure grows rather than shrinks over the next decade, then settles into a slower expansion phase.
On those cash flow forecasts, the DCF output suggests Kinder Morgan’s estimated intrinsic worth sits meaningfully above the current share price of $33.87. The recently approved $4.7b natural gas pipeline buildout helps explain why analysts see room for higher future free cash flow, even though the outlay is large and the payback is expected to be gradual. That gap between model value and traded price is the key question for anyone weighing Kinder Morgan at today’s level. Find out what Kinder Morgan could be worth using our Discounted Cash Flow (DCF) estimate.
The Kinder Morgan Narrative: What Would Justify Today's Price?
Narratives pick up where Kinder Morgan's valuation puzzle leaves off, by explaining which paths for future growth, profitability and earnings would need to occur for the stock to end up meaningfully above or below today's price. These narratives are available on Simply Wall St's Community page. Rather than relying on a single multiple or model output, each one presents the assumptions behind its own view of fair value so you can compare those inputs with Kinder Morgan's actual results as they are reported.
One of the top community narratives on Kinder Morgan: 8% undervalued
"Bullish analysts highlight record sanctioned backlog around $14.4b and emphasize that large gas projects such as Southeast Connector and the hyperscaler backed Permian Link..."
Discover why this Narrative puts Kinder Morgan at 8% undervalued.
One more Kinder Morgan factor to check before you move on
Before you focus only on Kinder Morgan’s cash flows and pipelines, it is worth asking who is steering the business and how their pay packets line up with your interests. See who runs Kinder Morgan and how they are paid.
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