Kimbell Royalty Partners (KRP): Revisiting Valuation After Recent Share Price Weakness
Kimbell Royalty Partners (KRP) has quietly slipped about 17% over the past month and nearly 30% this year, putting the stock back on many income focused investors watchlists.
See our latest analysis for Kimbell Royalty Partners.
The recent slide in Kimbell Royalty Partners’ 30 day share price return of minus 16.6 percent caps a year to date share price return of nearly minus 30 percent, even as its five year total shareholder return of roughly 150 percent signals that long term momentum has not completely faded.
If this recent weakness has you rethinking where to find durable income and growth, it could be a good moment to explore fast growing stocks with high insider ownership as potential fresh ideas beyond energy royalties.
With the units now trading at just half of the average analyst price target and suggesting a steep intrinsic discount, is Kimbell a mispriced cash flow vehicle, or is the market already bracing for weaker royalty growth ahead?
Most Popular Narrative: 33.1% Undervalued
With Kimbell Royalty Partners last closing at $11.50 against a most popular narrative fair value near $17, the embedded growth expectations behind that gap deserve a closer look.
The analysts have a consensus price target of $17.2 for Kimbell Royalty Partners 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 $24.0, and the most bearish reporting a price target of just $12.0.
Curious how a low current margin business gets marked for steep profit expansion and premium valuation multiples, all discounted at a precise hurdle rate? The most popular narrative lays out a detailed roadmap of rising revenues, sharply improving profitability and a future earnings multiple more often associated with fast growing sectors. Want to see exactly which financial levers have to fire in sequence for that target price to hold up? Read on to unpack the full growth and valuation blueprint behind this call.
Result: Fair Value of $17.20 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, sustained acquisition cost inflation or faster than expected declines in legacy wells could quickly compress margins and challenge those optimistic profit and valuation assumptions.
Find out about the key risks to this Kimbell Royalty Partners narrative.
Another View
While the popular narrative leans on future earnings and a rich 34.7 times multiple, the current price to sales of 3.4 times tells a tougher story. It sits above the industry at 1.5 times, peers at 2.8 times, and even its own fair ratio of 3.3 times. This hints at less margin of safety than the headline undervaluation suggests and raises the question of which lens to trust when sentiment turns.
See what the numbers say about this price — find out in our valuation breakdown.
Build Your Own Kimbell Royalty Partners Narrative
If you are not fully aligned with this perspective, or would rather dig into the numbers yourself, you can quickly craft a custom view in just a few minutes, Do it your way.
A great starting point for your Kimbell Royalty Partners research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.
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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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