We came across a bullish thesis on National Fuel Gas Company (NFG) on Value Investing Subreddit Page by Overall_Sport_7693. In this article, we will summarize the bulls’ thesis on NFG. National Fuel Gas Company (NFG)'s share was trading at $73.56 as of March 6^th. NFG’s trailing and forward P/E were 17.50 and 10.89 respectively according to Yahoo Finance.

A bustling natural gas terminal, capturing the busy flow of energy selling and distribution.

National Fuel Gas (NFG) stands out in the oil and gas sector due to its vertical integration, which makes it more resilient to commodity price cycles than most gas producers. Unlike many of its peers, NFG provides annual earnings guidance, showcasing the reliability of its business model. With strong growth prospects and an attractive valuation, the company presents a compelling investment opportunity. Its exploration and production segment generates about half of total earnings, while the gathering, storage, and utility segments contribute the other half. NFG has been expanding production at a rapid pace and expects low-to-mid single-digit production growth over the next three years. Additionally, modernization and expansion of its network should drive significant rate base growth, supporting earnings per share of approximately $6.75 this year, a target well-supported by hedging. Analysts broadly agree, forecasting earnings per share of $6.70 for 2024 and an 18% jump to $7.90 in 2025, fueled by production growth, cost efficiencies, and rate hikes.

Despite these strengths, NFG remains undervalued, trading at a forward price-to-earnings (P/E) ratio of 11.2x and just 9.5x estimated 2026 earnings. This is well below its five-year average P/E of 12.6x. If the stock’s valuation normalizes to historical levels, it could appreciate 33% by 2026. Beyond valuation, NFG has an unmatched 122-year dividend payment streak and 54 consecutive years of dividend increases. While the 2.7% yield isn’t high, the payout ratio of 30% and a leverage ratio of 2.3x EBITDA suggest continued dividend growth. Over the past five years, NFG has outperformed the S&P 500 and the Energy Select Sector SPDR Fund (XLE), rallying 93% excluding dividends. Though often overlooked due to its steady business model, NFG offers reliable growth at a discount, positioning it for strong future returns.

National Fuel Gas Company (NFG) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held NFG at the end of the third quarter which was 21 in the previous quarter. While we acknowledge the risk and potential of NFG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NFG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.