Texas Pacific Land (TPL): Evaluating Valuation After Post-Earnings Rally and Strengthened Institutional Support

Texas Pacific Land (TPL) is catching attention as its stock climbed 3% even though third-quarter earnings fell short of forecasts. This move stands out because the broader market had weaker performance on the same day.

See our latest analysis for Texas Pacific Land.

While Texas Pacific Land’s quarterly results underwhelmed on profit, the stock’s ability to advance even in a weak market hints at rising optimism. Large institutional moves, such as State Street Corp boosting its stake, underscore longer-term confidence, despite a year-to-date share price return of -22% and a one-year total return of -35%. With the recent buyback, ongoing dividend payments, and a mixed earnings backdrop, momentum looks uncertain but not lost for patient shareholders.

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This recent rally, in spite of disappointing results and a challenging year for shareholders, raises the key question: is Texas Pacific Land now undervalued with more upside ahead, or has the market already priced in any future growth?

Most Popular Narrative: 20% Undervalued

At $920.12, Texas Pacific Land’s share price sits notably below the narrative’s fair value estimate of $1,148. This opens up a disconnect between market sentiment and what’s baked into this narrative. Today’s price reflects subdued expectations, but could the consensus be missing a deeper story?

Analysts expect earnings to reach $610.3 million (and earnings per share of $24.12) by about July 2028, up from $460.2 million today. In order for the above numbers to justify the analyst's price target, the company would need to trade at a PE ratio of 41.9x on those 2028 earnings, down from 52.3x today. This future PE is greater than the current PE for the US Oil and Gas industry at 12.6x.

Read the complete narrative.

Curious how such aggressive projections shape this valuation? The narrative is built on ambitious margin boosts, bold profit jumps, and a future earnings multiple you rarely see in energy stocks. Want to know what financial levers the consensus is betting on? Dive in and uncover the quantitative sparks driving the fair value call.

Result: Fair Value of $1,148 (UNDERVALUED)

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

However, ongoing oil royalty growth and expanding water services revenues could support TPL’s value, even if these positive trends face future volatility.

Find out about the key risks to this Texas Pacific Land narrative.

Another View: Multiples Show a Higher Bar

Looking through the lens of earnings multiples, Texas Pacific Land trades at 44.4 times earnings, far above both its peer average of 13.8 and the broader US Oil and Gas industry at 13.5. Such a wide gulf suggests investors may be taking on extra valuation risk if expectations slip, or are betting on growth others do not see. Could the market be getting ahead of itself, or is this premium truly justified?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Texas Pacific Land Narrative

If you have your own perspective or want to dig deeper into the numbers, you can craft your own take on Texas Pacific Land’s story in just a few minutes. Do it your way

A great starting point for your Texas Pacific Land research is our analysis highlighting 1 key reward 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.