A Fresh Look at Kimbell Royalty Partners (KRP) Valuation After Q3 Production Outpaces Expectations

Kimbell Royalty Partners (NYSE:KRP) just reported third quarter results, delivering production growth above the midpoint of guidance and affirming its operational outlook despite a softer environment for the energy sector.

See our latest analysis for Kimbell Royalty Partners.

Over the past year, Kimbell Royalty Partners’ share price has faced pressure with an 18.4% year-to-date decline, while its 1-year total shareholder return sits at -10.2%. Still, the latest production and distribution announcements have helped the stock regain some footing recently, with short-term momentum turning slightly positive. Longer-term investors have seen substantial rewards, as Kimbell’s five-year total shareholder return stands at an impressive 232%.

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With shares still trading at a meaningful discount to analyst price targets, investors are left to wonder whether Kimbell Royalty Partners offers genuine value at current levels or if the market is already factoring in its future growth prospects.

Most Popular Narrative: 22.2% Undervalued

With Kimbell Royalty Partners' fair value estimated at $17.20 compared to a last close at $13.39, the leading narrative points to substantial upside potential and highlights strategic levers in play. Investors are watching closely to see which drivers will shape the stock’s next major move.

“Growing global energy needs and underinvestment in new oil and gas supply underpin structurally higher long-term commodity prices, which supports Kimbell's realized prices and cash flow growth potential. Kimbell's disciplined, accretive acquisitions in high-quality, diversified basins like the Permian and Haynesville continue to expand its production base and royalty volumes, which should drive revenue and distributable earnings higher.”

Read the complete narrative.

Want to know the secret behind this bullish price expectation? Behind the scenes, there is a bold path set by double-digit earnings expansion, surging royalty volumes, and a profit margin transformation that rivals some of the market’s fastest growers. Which critical assumptions power this impressive target? Find out how forecasted growth and management’s calculated bets come together in the full narrative.

Result: Fair Value of $17.20 (UNDERVALUED)

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

However, ongoing increases in acquisition costs and production slowdowns in key basins could quickly turn today's bullish story into a more cautious outlook.

Find out about the key risks to this Kimbell Royalty Partners narrative.

Another View: A Look at Sales-Based Valuation

While the fair value estimate signals strong upside, a look at Kimbell Royalty Partners’ current price-to-sales ratio of 3.9x paints a less optimistic picture. This ratio stands higher than both its industry average of 1.5x and the peer group’s 2.7x. It also exceeds the fair ratio of 3.1x that the market could shift toward. For investors, this raises questions about whether the stock’s apparent value is as clear-cut as it seems.

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

Build Your Own Kimbell Royalty Partners Narrative

If you want to challenge these insights or prefer to follow your personal approach, you can dig into the details and craft your own analysis 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 4 important warning signs 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.