Energy Transfer (ET): A High-Conviction Energy Infrastructure Play Amid Undervaluation and Regulatory Tailwinds

Energy Transfer (ET) has long been a cornerstone of the U.S. energy infrastructure landscape, but recent developments position it as a compelling high-conviction investment opportunity. Amid a sector-wide recovery and a regulatory environment increasingly favorable to conventional energy, ET appears significantly undervalued based on fundamental metrics and forward-looking projections. This analysis synthesizes valuation data, regulatory tailwinds, and operational momentum to build a case for Energy Transfer as a strategic buy.

Undervaluation: A Compelling Intrinsic Value Gap

A discounted cash flow (DCF) analysis from Simply Wall St estimates an intrinsic value of $40.11 per share, implying a 57.2% discount to its recent price of $17.15. This gap widens when considering alternative valuation approaches: a growth-oriented model incorporating infrastructure expansion projects calculates a fair value of $22.55, indicating a 22.6% undervaluation, according to Energy Transfer's press release.

The company's Price-to-Earnings (PE) ratio of 13.2x further underscores its attractiveness. This metric is not only below its calculated fair ratio of 19.4x but also significantly lower than the peer group average of 18.5x, per Simply Wall St. The Motley Fool highlights that ET trades at less than 9 times earnings, one of the lowest valuations in its peer set. Compounding this appeal is a 7.6% dividend yield, one of the highest in the sector, supported by a robust project backlog that could drive earnings reacceleration, per StockAnalysis.

Regulatory Tailwinds: A Policy-Driven Tailwind

The regulatory landscape in 2025 has shifted decisively in favor of conventional energy infrastructure, creating a tailwind for Energy Transfer. The Trump administration's executive orders, including Declaring a National Energy Emergency and Unleashing American Energy, have streamlined permitting for oil, gas, and coal projects while suspending offshore wind leases, as detailed in a DLA Piper briefing. These policies reduce regulatory friction for Energy Transfer's core operations, particularly its natural gas transportation and midstream segments, which saw 11% and 10% volume growth, respectively, in Q2 2025.

FERC has also played a pivotal role in shaping the regulatory environment. Recent orders have streamlined interconnection processes and addressed grid reliability, directly benefiting Energy Transfer's infrastructure projects. For instance, FERC's approval of the Nederland Flexport NGL Export Expansion Project—which added 250,000 Bbls/d of export capacity—demonstrates the agency's support for expanding energy infrastructure.

Meanwhile, the Inflation Reduction Act (IRA) and the newer One Big Beautiful Bill Act (OBBBA) have introduced nuanced incentives for carbon sequestration. The 45Q tax credit, which provides $85 per metric ton for saline storage under OBBBA, has spurred CO2 capture growth. The U.S. Energy Information Administration (EIA) projects that saline storage sequestration will rise from negligible levels in 2024 to 52 million metric tons by 2040, driven by these incentives. Energy Transfer's involvement in carbon capture and storage (CCS) aligns with this trend, positioning it to capitalize on bipartisan support for decarbonization technologies.

Operational Momentum: Projects and Partnerships as Catalysts

Energy Transfer's Q2 2025 results underscore its operational strength. The company reported $3.87 billion in adjusted EBITDA and $1.16 billion in net income, driven by record-setting volumes and the completion of key projects like the Lenorah II Processing Plant in the Midland Basin. Growth capital expenditures of $1.04 billion reflect a disciplined approach to expanding capacity, while new LNG supply agreements—such as a 20-year SPA with Chevron U.S.A. Inc.—secure long-term revenue streams.

The company's project pipeline is equally compelling. With $1.04 billion in growth capital expenditures and a focus on infrastructure expansion, Energy Transfer is well-positioned to leverage its low-cost, high-volume model. These projects, combined with favorable tax credits and regulatory support, create a virtuous cycle of earnings growth and reinvestment.

Conclusion: A High-Conviction Buy

Energy Transfer's combination of undervaluation, regulatory tailwinds, and operational momentum makes it a standout in the energy infrastructure sector. The stock's current price of $17.15 represents a significant discount to its intrinsic value of $40.11, while its low PE ratio and high dividend yield offer immediate income and growth potential. Regulatory shifts under the Trump administration and FERC's pro-infrastructure stance further reduce headwinds, while carbon sequestration incentives open new revenue avenues. For investors seeking a high-conviction play on energy sector recovery, Energy Transfer is a compelling candidate.