Pembina Pipeline (TSX:PPL) Could Be 5% Undervalued After Pacific Link Project Win
Pembina Pipeline (TSX:PPL) just hit a key milestone on the proposed Pacific Link pipeline after the Government of Canada listed the project as a Project of National Interest under the Building Canada Act.
Pembina Pipeline shares have gained momentum this year, with a year to date share price return of 30.53% and a 1 day move of 2.35% taking the stock to CA$69.14. The 1 year total shareholder return of 32.46% and 5 year total shareholder return of 115.64% point to investors steadily rewarding the business as projects like Pacific Link progress and preferred share dividends remain in focus.
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Pembina Pipeline now trades close to analyst targets yet still shows a wide gap to some intrinsic value estimates. After this latest surge, where does a reasonable fair value band really land for new money and existing holders?
Most Popular Narrative: 5.3% Undervalued
Against a fair value estimate of CA$73.00, Pembina Pipeline at CA$69.14 screens as modestly undervalued. The current price asks investors to weigh execution risk on a long list of contracted projects against that gap.
Ongoing build out of large, fee-based projects such as Cedar LNG, the Greenlight Electricity Centre and the Heartland Extraction Plant keeps Pembina Pipeline deploying capital into assets that are expected to add contracted EBITDA once in service, which would support future revenue and cash flow growth.
See why 68 investors see Pembina Pipeline as 5% undervalued.
Result: Fair Value of CA$73 (UNDERVALUED)
Still, toll resets on systems like Alliance and cost or timing pressure on big builds such as Cedar LNG or Greenlight could quickly challenge that view of the stock as undervalued.
Find out about the key risks to this Pembina Pipeline narrative.
Next Steps
Mixed feelings about Pembina Pipeline after this rally. Weigh the progress and the open questions, and then test the full picture for yourself with 2 key rewards and 2 important warning signs.
Looking for more Pembina Pipeline style ideas?
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- Chase mispriced quality and compare Pembina Pipeline against other companies that screen as attractively valued in our curated 7 high quality undervalued stocks.
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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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