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A “normal” or “fair” PE ratio considers not just how much a company is currently earning, but also how fast those earnings are growing and the risks involved. Faster-growing or lower-risk companies tend to deserve a premium with higher PEs, while slow-growth or higher-risk companies typically trade at a discount.

At the moment, Expand Energy trades at a PE ratio of 33.49x. This is more than double the average PE for the Oil and Gas industry, which sits at 13.30x, and it is also significantly higher than the average for its closest peers at 15.33x. These comparisons might make the stock look expensive at first glance.

However, Simply Wall St’s proprietary “Fair Ratio” offers a more nuanced benchmark. Unlike basic peer or industry averages, the Fair Ratio takes into account the company’s specific growth outlook, profit margins, size, and risk profile as well as industry and market cap, to deliver a more precise estimate of what would be a fair multiple for Expand Energy. For this company, the Fair Ratio comes out at 23.07x.

When we compare Expand Energy’s current PE of 33.49x with its Fair Ratio of 23.07x, it suggests that investors are paying a premium well above what is justified by its fundamentals and outlook.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1442 companies where insiders are betting big on explosive growth.

Earlier, we mentioned there is an even better way to understand valuation. Let’s introduce you to Narratives.

A Narrative is simply your story about a company. It is how you connect the numbers, like future revenue or margins, with what you believe is actually possible for that business. Instead of just relying on a single forecast, Narratives let you combine your perspective on things like expansion plans, market risks, or breakthrough events with realistic financial assumptions to generate an independent view of fair value.

Narratives link a company’s story to a forecast, and then connect that forecast to a fair value, making the entire investment decision process much more intuitive. On Simply Wall St’s Community page, millions of investors are already using Narratives to build, share, and compare these perspective-driven valuations. No spreadsheets or complex models are required. Narratives auto-update whenever new news or fresh earnings arrive so your story can keep pace with the real world.

For example, with Expand Energy, some investors are bullish, expecting rapid digital-driven margin gains and forecasting a high fair value of $154.00. More cautious analysts, concerned about stranded asset risks, see a fair value closer to $98.00. The platform lets you easily compare these views to the current share price and decide if it is time to buy or hold.

Do you think there’s more to the story for Expand Energy? Head over to our Community to see what others are saying!

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.

Companies discussed in this article include EXE.

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