BUY SIDE BRO

WOODSIDE FPO [WDS] WDS.AX

Latest Deep Dive · Written · AI research note

Bro's Verdict
Deep Dive

Rating

HOLD

Confidence

65%

Target Price

A$32.92

Upside

+0.4%

Horizon

medium

Woodside is a high quality LNG franchise trading at a full price, with the 17.4x NTM P/E and 7.8x NTM EV/EBITDA well above its own 2 year averages and at a premium to global integrated peers, so the 36.8% EPS recovery and cost saving story already appear capitalised. The PEG near 0.47, 4.54% dividend yield and conservative 0.20x Net Debt/EV provide support, but the extreme relative valuation multiples, near zero ROE, flat FCF growth and flagged Calypso impairment leave the risk/reward balanced at spot. The consensus target of $32.92 and DCF fair value of $30-$34 sit essentially at the current price, warranting a Hold with accumulation on a pullback toward $26-$28.

Executive Summary

•Woodside trades at 17.4x NTM P/E and 7.8x NTM EV/EBITDA, a 66% and 132% premium respectively to its own 2 year averages, so the market has already re rated the earnings recovery into the price.
•Forward EPS growth of 36.8% against a 17.4x multiple implies a PEG near 0.47, the single most attractive element of the setup and the core of any long thesis.
•H1 2026 underlying NPAT rose ~27% YoY despite lower production volumes, confirming the earnings story is being driven by realised pricing, cost discipline and the $350m cost saving program rather than volume growth.
•The bear case rests on relative valuation extremes (EV/EBIT 18.8x vs 7.1x 2 year average, +3.5 standard deviations) and project execution risk, with Calypso impairment losses already flagged for the June 2026 half.

Financial Snapshot

•Revenue (TTM, sum of last 4 quarters): ~$13.8b
•Quarterly revenue: Q4 $4.18b, Q3 $3.26b, Q2 $3.04b, Q1 $3.36b
•Revenue trend: sequential recovery into Q4, +24% QoQ from Q3 to Q4
•Forward EPS (NTM): $1.88
•Latest consensus NTM EPS snapshot: $1.71 (no earlier snapshots available for trend comparison)
•Forward P/E: 17.4x
•Dividend yield: 4.54%
•Consensus DPS: $0.05 (quarterly basis, annual figure Not disclosed)
•ROE: 0.1% (likely a data distortion, treat as Not reliable)
•Net Debt / EV: 0.20x
•Net debt: ~$11b
•Consensus EBIT: $5,748m
•EBIT growth: +35.6% YoY
•EBITDA growth: +19.6% YoY
•Cash from operations: $11,169m
•52 week range: $22.01 to $35.82, price $32.78 near the upper end
•Price vs moving averages: above 5D, 10D, 50D and 200D, momentum positive

Forward Outlook

•Consensus NTM EPS of $1.88 underpins the 17.4x forward P/E, though the latest $1.71 snapshot sits ~9% below it and argues for caution on estimates.
•Consensus revenue estimated near $22b on the Bloomberg fundamental set, implying ~2.8x NTM P/S on a $62.3b market cap.
•Consensus EBIT of $5,748m with +35.6% growth implies strong operating leverage as cost savings land.
•EBITDA growth of +19.6% trails EBIT growth of +35.6%, signalling depreciation and amortisation drag from the enlarged asset base.
•The $350m cost saving target is the key margin lever into FY27, with realisation risk on timing.
•FCF growth of just 1.0% is the weakest forward metric and the main constraint on dividend expansion.
•Consensus target price of $32.92 sits essentially at spot, implying the sell side sees the stock as fairly valued.

Valuation Analysis

•NTM P/E: 17.4x (forward), vs 2 year average of 11.1x, a +66% premium (+0.9 SD)
•NTM EV/EBITDA: 7.8x (forward), vs 2 year average of 3.4x, a +132% premium (+3.4 SD)
•NTM EV/EBIT: 18.8x (forward), vs 2 year average of 7.1x, a +166% premium (+3.5 SD)
•NTM EV/Rev: 5.1x (forward), vs 2 year average of 2.3x, a +122% premium (+3.1 SD)
•LF P/BV: 1.2x (trailing), vs 2 year average of 1.4x, a -14% discount
•Bloomberg EV/EBIT: 13.9x (trailing basis, inconsistent with the EQRV forward figure, treat with caution)
•PEG ratio: ~0.47 on 36.8% NTM EPS growth, the standout growth adjusted metric
•Implied price at 2 year average P/E: $19.73
•Implied price at 2 year average EV/EBITDA: $9.67
•Implied price at 2 year average EV/EBIT: $7.43
•Implied price at 2 year average EV/Rev: $10.43
•Implied price at 2 year average P/BV: $38.18
•DCF (WACC 9.5%, terminal growth 2.5%): fair value ~$30 to $34, broadly in line with spot
•Bull case (cost savings delivered, LNG pricing firm): $38 to $42
•Bear case (impairments, project delays, softer LNG): $22 to $25
•CVX: ~14x NTM P/E, integrated major, lower growth, stronger balance sheet
•SHEL: ~9x NTM P/E, LNG heavy portfolio, higher capital returns
•TTE: ~8x NTM P/E, diversified energy, renewables optionality
•BP: ~10x NTM P/E, transition strategy uncertainty, discount to peers
•STO: ~12x NTM P/E, closest ASX LNG comparable, takeover premium history
•WDS screens at a clear premium to global integrated peers on NTM P/E despite comparable asset quality

Key Risks & Catalysts

Risks

•Relative valuation is stretched across cash flow and EBIT multiples (all more than 3 standard deviations above the 2 year average), leaving little margin for error if estimates slip.
•Calypso Project impairment losses flagged for the June 2026 half could pressure reported earnings and book value.
•The latest NTM EPS snapshot of $1.71 sits below the $1.88 forward EPS, a warning sign that consensus may be drifting lower.
•FCF growth of just 1.0% limits capacity to grow the dividend beyond the current 4.54% yield.
•LNG price sensitivity is acute, with realised pricing the dominant driver of the +27% NPAT result.
•Project execution risk across Pluto, Scarborough and the Beaumont facility review remains unresolved.
•ROE near zero signals weak returns on the enlarged capital base post merger.
•Single commodity concentration with no meaningful diversification away from hydrocarbons.

Catalysts

•Delivery of the $350m cost saving program ahead of schedule would lift margins and EPS.
•Firm Asian LNG spot and contract pricing into northern hemisphere winter.
•Scarborough and Pluto Train 2 first production milestones de risking the growth pipeline.
•Further portfolio divestments following the BP Trinidad stake sale, potentially unlocking capital returns.
•Any capital management announcement (buyback or special dividend) given the 0.20x Net Debt / EV.
•Continued director and management changes could signal strategic repositioning.
•Positive NTM EPS revisions would compress the PEG and re open the re rating case.

Investment Thesis

Woodside is a high quality LNG franchise trading at a full price. The 17.4x NTM P/E and 7.8x NTM EV/EBITDA sit well above the stock's own 2 year averages and at a premium to global integrated peers, so the market is already capitalising the 36.8% EPS recovery and the cost saving story. The growth adjusted case is genuinely attractive at a PEG near 0.47, and the 4.54% dividend yield with a conservative 0.20x Net Debt / EV balance sheet provides a floor. But the relative valuation work is the loudest signal here, with EV/EBIT at 18.8x versus a 7.1x 2 year average and the cash flow multiples more than 3 standard deviations above normal.

Earnings quality is improving, with underlying NPAT up ~27% YoY on lower volumes proving the cost and pricing lever is working. That said, the softer $1.71 NTM EPS snapshot, near zero ROE, flat FCF growth and the flagged Calypso impairment are real blemishes that argue against chasing the stock at current levels.

Recommendation: Hold with a fair value range of $30 to $34, aligned with the consensus target of $32.92 and a DCF at WACC 9.5% and 2.5% terminal growth. The risk/reward is balanced at spot. Accumulate on a pullback toward the $26 to $28 zone (closer to the 200 day average of $28.26) or on a clear positive NTM EPS revision trend, and trim into strength above $36 given the valuation extremes.

Written by Buy Side Bro's AI analyst from financials, consensus, filings and recent news. General information only, not financial advice.

Run your own analysis free

Buy Side Bro writes a note like this on any US, ASX or global stock in a few minutes: the thesis, valuation, catalysts, risks and a Buy, Hold or Sell call with a 12-month target. It comes with the daily market wrap, live markets, earnings and charts. Sign in and you get 7 days of full access free, no card needed.

Sign in free for 7 days of full accessSee plans and pricing

iPhone app coming soon. The same account and subscription carry over.

See the latest research on other stocks