NextDecade (NEXT) Swung To Profit, Is The Stock Still Cheap?

Why NextDecade’s Earnings Swing Matters

NextDecade (NEXT) just flipped from a third quarter net loss to net income of US$155.38 million, with earnings per share turning positive and year to date losses narrowing sharply.

This kind of profit swing often prompts investors to reassess what they think the business is worth, especially when the improvement spans both basic and diluted EPS measures.

Recent trading has reflected some of this shifting sentiment around NextDecade, with the share price down 6.7% over the last day and sliding over the past month and quarter, even though the year to date share price return is 16.2% and the 5 year total shareholder return is 69.8%. This points to long run momentum, while shorter term weakness may be challenging it as investors reassess the risk and reward trade off after the earnings swing.

Scan how NextDecade’s earnings swing compares with other energy names by zeroing in on our hand picked 31 resilient stocks with low risk scores list, which has kept risk scores in check.

After that sharp earnings swing and a share price that has pulled back in recent weeks but remains higher year to date, does it make more sense to buy NextDecade now or wait for a cheaper entry as the valuation picture comes into focus?

Most Popular Narrative: 43.2% Undervalued

NextDecade last closed at $6.25, compared with a widely followed narrative fair value of $11.00 that anchors on Rio Grande LNG ramp up and long dated contracts.

The July 144A issue of US$3.5b senior secured notes for Rio Grande LNG that attracted very strong institutional demand and BBB minus ratings creates a benchmark funding channel that NextDecade can potentially reuse for later phases, which could influence its long term interest expense and earnings.

See why 5 investors see NextDecade as 43% undervalued.

Result: Fair Value of $11.00 (UNDERVALUED)

Still, the bullish NextDecade narrative relies on Rio Grande LNG cash flows arriving on schedule, while ongoing losses and fresh equity capacity increase the risk of future dilution.

Find out about the key risks to this NextDecade narrative.

Next Steps

Reading this mix of strong fair value arguments and real execution risks, you probably want to see the data side by side and move fast before sentiment shifts again. Weigh both angles yourself with the 1 key reward and 3 important warning signs.

Looking for more investment ideas beyond NextDecade?

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