Kinder Morgan (KMI) Valuation Check As Backlog Grows And Geopolitical Tailwinds Lift Investor Interest

Why Kinder Morgan is back in focus

Kinder Morgan (KMI) is back on investor radar after reporting strong quarterly results, expanding its natural gas project backlog to US$10b, and benefiting from higher oil prices driven by rising U.S.-Iran tensions.

See our latest analysis for Kinder Morgan.

The renewed interest has been reflected in Kinder Morgan’s share price, which has a 30 day share price return of 10.1% and a 90 day share price return of 23.05%. Its 1 year total shareholder return of 34% and 5 year total shareholder return of 172.39% indicate that momentum has been building over time as investors reassess growth prospects and risks around its expanding natural gas project backlog and higher energy prices.

If this energy story has your attention, it could be a good moment to see what else is moving in infrastructure, including 23 power grid technology and infrastructure stocks, as potential additions to your watchlist.

With Kinder Morgan trading around US$33.58 and sitting close to several analyst targets yet showing a 31.06% intrinsic discount, the key question is whether the recent run still leaves mispricing or if markets are already banking future growth.

Most Popular Narrative: 4.8% Overvalued

The most followed Kinder Morgan narrative puts fair value at about $32.05 per share, slightly below the recent $33.58 price. This frames the current debate around upside from here.

The analysts have a consensus price target of $31.064 for Kinder Morgan based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $38.0, and the most bearish reporting a price target of just $24.0.

Read the complete narrative.

Want to see what is baked into that fair value? Revenue and earnings are modeled to rise, margins to shift, and the future P/E to stretch beyond sector norms. The full narrative shows how those moving parts combine using a 7.02% discount rate.

Result: Fair Value of $32.05 (OVERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, there is still meaningful risk if high leverage constrains Kinder Morgan’s flexibility or if energy transition policies and competition weigh on future pipeline volumes and pricing.

Find out about the key risks to this Kinder Morgan narrative.

Another View: Cash Flows Tell a Different Story

While the popular narrative has Kinder Morgan at roughly 4.8% overvalued at $33.58 versus a $32.05 fair value, our DCF model points the other way. On that cash flow view, Kinder Morgan looks inexpensive, with the shares trading about 31.1% below an estimated $48.71 value. Which lens better captures the risk around future projects and leverage?

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 Kinder Morgan 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 49 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

If this mix of optimism and concern has you thinking, do not wait to look under the hood yourself. Weigh both sides with 3 key rewards and 2 important warning signs.

Ready to hunt for your next idea?

If Kinder Morgan has you thinking more broadly about your portfolio, do not stop here. The right watchlist additions today could shape your returns tomorrow.

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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