Is TotalEnergies (ENXTPA:TTE) Still a Compelling Buy Amid Analyst Upgrades and Structural Energy Transition Trends?

The energy sector is undergoing a profound transformation, driven by decarbonization imperatives and shifting demand dynamics. Against this backdrop, TotalEnergies (ENXTPA:TTE) has emerged as a focal point for investors seeking exposure to a company navigating the dual challenges of energy transition and profitability. With recent analyst upgrades and a valuation that appears disconnected from historical norms, the question arises: Is TTE still a compelling buy? To answer this, we must dissect its valuation dislocation, assess its long-term cash flow potential, and contextualize these within the broader energy transition narrative.

Valuation Dislocation: A Discount Amid Sector Turbulence

TotalEnergies' current valuation metrics suggest a significant discount relative to both historical averages and industry peers. As of late 2025, the company trades at a trailing price-to-earnings (P/E) ratio of 10.07 and a forward P/E of 8.91, well below its 10-year average of 13.77 and the Energy sector's 15.58 average. Similarly, its enterprise value-to-EBITDA (EV/EBITDA) ratio of 3.9x lags behind its 13-year median of 5.04 and the Oil & Gas sector's 7.18 median. These metrics position TTE as one of the most undervalued majors, even as its fundamentals remain robust.

The dislocation is further amplified by its price-to-free cash flow (P/FCF) ratio. While direct data is sparse, historical trends indicate a P/FCF of 9.20 for the past 12 months, a figure that, when compared to peers like Equinor and Phillips 66, underscores TTE's relative affordability. This valuation gap is not merely a function of short-term volatility but reflects broader skepticism about the energy transition's impact on traditional hydrocarbon assets. However, such skepticism may be misplaced, as TotalEnergies' strategic pivot toward renewables and disciplined capital allocation could unlock value in the coming years.

Long-Term Cash Flow Potential: A Structural Tailwind

TotalEnergies' free cash flow (FCF) trajectory offers a critical lens through which to evaluate its long-term prospects. Between 2020 and 2024, FCF fluctuated significantly, peaking at $32.2 billion in 2022 before retreating to $16.7 billion in 2024. While 2025 has seen mixed quarterly results-Q1 reported negative FCF of -$1.4 billion, while Q3 rebounded to $5.1 billion-the company's projections paint a more optimistic picture. Analysts estimate FCF will reach $19.9 billion by 2030, with growth driven by disciplined capital expenditures and a strategic focus on high-margin segments.

This growth is underpinned by TotalEnergies' energy transition strategy, which allocates $4 billion annually to low-carbon energy projects, primarily within its Integrated Power business. By 2030, this segment is projected to achieve a 12% return on adjusted capital employed (ROACE) and become free cash-flow positive by 2028. Meanwhile, the company's $7.5 billion savings program over 2026–2030- reducing net capital expenditures to $15–17 billion annually-ensures that cash flow growth is not sacrificed in the pursuit of decarbonization. These measures align with a broader industry trend: energy companies that balance transition investments with profitability are increasingly rewarded by markets.

Energy Transition as a Catalyst for Value Creation

TotalEnergies' energy transition strategy is not merely a defensive move but a proactive value-creation engine. The company aims to increase electricity production to 100–120 TWh/year by 2030, with 70% from renewables and 30% from flexible gas. This diversification mitigates exposure to oil price volatility while tapping into the growing demand for clean energy. For instance, its Integrated LNG business is expected to deliver cash flow growth of over 70% by 2030, fueled by projects in the U.S. and Qatar.

Moreover, TotalEnergies' commitment to reducing Scope 1+2 emissions by 50% by 2030 compared to 2015 levels aligns with regulatory and investor expectations, reducing the risk of stranded assets. This strategic alignment is critical in an era where ESG (Environmental, Social, and Governance) metrics increasingly influence capital allocation. By embedding sustainability into its core operations, TotalEnergies is positioning itself to outperform peers that lag in the transition.

Conclusion: A Buy for the Long-Term Investor

TotalEnergies' valuation dislocation reflects a market that underappreciates the company's ability to navigate the energy transition while maintaining profitability. Its current P/E and EV/EBITDA ratios suggest a discount that is historically rare and structurally unjustified given its cash flow projections and strategic clarity. The projected $19.9 billion in FCF by 2030, coupled with a disciplined capital allocation framework, provides a strong foundation for shareholder returns-particularly as the company reinvests in high-growth renewables and LNG.

For investors with a multi-year horizon, TTE represents a compelling opportunity. The energy transition is not a zero-sum game; companies that adapt with agility and foresight, like TotalEnergies, are likely to emerge as winners. While short-term volatility remains a risk, the structural tailwinds of decarbonization and disciplined execution make a compelling case for a long position in this multi-energy giant.