A Look At Permian Resources (PR) Valuation After BofA Downgrade And Recent Operational Strength

Simply Wall St.01-19

BofA Securities has moved Permian Resources (PR) to a Neutral rating, citing valuation after strong 2025 production results, an inventory-adding acquisition, and a corporate reorganization that aligns...

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See our latest analysis for Permian Resources. Recent moves in Permian Resources’ share price suggest momentum has been building, with a 90 day share price return of 16.79% and a 1 year total shareholder return of a 6.01% decline, contrasting with a very large 5 year total shareholder return. Investors are weighing the BofA downgrade alongside production results, acquisitions and ongoing shelf registration activity around equity and warrants. If this kind of energy sector story has your attention, it could be a good time to see what is happening across aerospace and defense stocks as another area of the market to compare. With Permian Resources trading at $14.40 against an average analyst target near $18 and a very large 5 year total return in the rearview mirror, is this still a buying opportunity, or is the market already pricing in future growth? AdvertisementMost Popular Narrative: 20.2% Undervalued At a last close of $14.40 against a narrative fair value of $18.05, the current price sits below where this widely followed view places Permian Resources, anchoring the debate around how much future growth and cash generation the market is currently willing to recognize.  Recent optimization and expansions of transportation and marketing agreements are expected to allow Permian Resources to realize premium pricing for both crude and natural gas, increasing exposure to key Gulf Coast and non-Waha hubs; these actions are anticipated to directly uplift revenues and free cash flow, with estimated $50 million higher free cash flow in 2026 (and further increases beyond 2026 as more volume is shifted).  Read the complete narrative. Want to see why a relatively modest revenue growth outlook still supports a higher value? The narrative leans on firmer margins, rising earnings per share and a future P/E that sits below the sector’s current level. Curious how those pieces come together over time under a 7.3% discount rate and planned share count changes? The most widely followed narrative applies a 7.29% discount rate and ties its $18.05 fair value to expectations for steady mid single digit revenue growth, slightly higher profit margins and earnings rising over the next few years, alongside a modest reduction in shares outstanding. That view also assumes the company trades on a future P/E in the low teens, which is framed as below the current P/E level cited for the broader US oil and gas group. Result: Fair Value of $18.05 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, this hinges on commodity prices holding up and capital spending staying effective, with any hit to oil or gas pricing or M&A missteps quickly challenging that story. Find out about the key risks to this Permian Resources narrative.  Build Your Own Permian Resources Narrative If you are not fully on board with this view or prefer to lean on your own research, you can piece together your version in under three minutes by starting with Do it your way. A great starting point for your Permian Resources research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision. Looking for more investment ideas? If you stop with just one stock, you could miss other opportunities that fit your style, so widen your view and let fresh ideas challenge your watchlist.  Spot potential value early by scanning these 3529 penny stocks with strong financials for smaller names that still show financial strength. Explore major technology shifts by checking out these 24 AI penny stocks that connect artificial intelligence themes with share market exposure. Emphasize cash flow based pricing by reviewing these 873 undervalued stocks based on cash flows that screen for companies trading below their estimated cash flow value.   This article by Simply Wall St is general in nature. We provide commentary based on historical data\n    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\n    financial situation. We aim to bring you long-term focused analysis driven by fundamental data.\n    Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.\n    Simply Wall St has no position in any stocks mentioned.New: Manage All Your Stock Portfolios in One PlaceWe've created the ultimate portfolio companion for stock investors, and it's free.• Connect an unlimited number of Portfolios and see your total in one currency• Be alerted to new Warning Signs or Risks via email or mobile• Track the Fair Value of your stocksTry a Demo Portfolio for FreeHave feedback on this article? Concerned about the content? Get in touch with us directly. 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