Is There Opportunity in Diamondback Energy After Viper Considers Sale of Non-Permian Assets?

Thinking about what to do with Diamondback Energy stock? You are definitely not alone. With oil prices in flux and the energy sector always making headlines, it makes sense to take a closer look at what is driving Diamondback’s numbers and, more importantly, whether the current price is giving you a deal or setting you up for disappointment.

Let us set the stage by looking at how the stock has behaved lately. Over the last week, shares have dipped by 3.3% to close at $139.44, showing some short-term hesitation after a modest 0.7% gain over the past month. Year to date, Diamondback is down a notable 16.4%, and the one-year picture is even steeper at a 22.2% decline. If you zoom out, the stock’s three-year return sits at 8.6%, and the five-year performance is eye-popping, coming in at 493.3%. That kind of long-term return makes you wonder whether the current valuation could offer another big opportunity or signal a turning point.

Some of these moves can be traced back to recent developments. For example, the market has taken note of news around Viper Energy, the Diamondback affiliate exploring a sale of assets outside the Permian Basin. Additionally, Diamondback’s CEO made waves by saying U.S. oil output growth is likely to stall if prices remain around the $60 mark, which could sway future supply and profitability expectations across the sector.

Now, onto what really matters: is the stock undervalued? By every quantitative check that matters, Diamondback knocks it out of the park, clocking in with a valuation score of 6 out of 6. That means Diamondback comes up as undervalued in all six of the key tests analysts use to vet a bargain. But before you jump in, let’s break down exactly how these valuations work, and stick around because at the end, I will introduce an even more insightful way to measure just how much value Diamondback might hold for your portfolio.

Why Diamondback Energy is lagging behind its peers

Approach 1: Diamondback Energy Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a widely used valuation approach that estimates a company's worth by forecasting its future cash flows and then discounting those projections back to today’s value. This helps investors gauge what a stock should be worth based on expected performance instead of just current market swings.

For Diamondback Energy, the DCF model starts with its latest trailing twelve months’ Free Cash Flow (FCF), which stands at $301 million. Analysts expect substantial growth over the coming years, predicting FCF to rise above $5 billion annually by 2029. While analysts typically project five years ahead, in this case more distant forecasts are extrapolated by Simply Wall St to capture long-term potential.

Story Continues

Using these projections and discounting all future FCF back to present value, Diamondback’s estimated intrinsic value comes out to $364.21 per share. With the current share price at $139.44, this means the stock is trading at a 61.7% discount to its DCF fair value. In simple terms, shares look deeply undervalued according to this analysis. For investors, this sizable gap could indicate a significant opportunity as long as the assumptions about future cash flows hold up.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Diamondback Energy.FANG Discounted Cash Flow as at Oct 2025

Our Discounted Cash Flow (DCF) analysis suggests Diamondback Energy is undervalued by 61.7%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Diamondback Energy Price vs Earnings

For companies posting steady profits like Diamondback Energy, the Price-to-Earnings (PE) ratio is one of the most widely recognized ways investors gauge a stock’s value. The PE ratio tells us how much investors are willing to pay today for a dollar of future earnings, and it is especially useful for profitable businesses because it directly ties the share price to actual earnings power.

Of course, not all companies deserve the same PE ratio. Higher growth businesses often command a premium, while those with higher risks or flat prospects tend to trade at lower multiples. The appropriate PE for any stock depends on its earnings growth outlook, stability, risk profile, and the broader industry context.

Looking at the numbers, Diamondback trades at a PE of 10.6x. That is below both the average for oil and gas industry peers (12.7x) and the wider peer group (20.3x). However, instead of just comparing to other companies, Simply Wall St’s proprietary "Fair Ratio" brings more nuance. This metric factors in Diamondback’s own growth, risk, profit margin, its size, and other relevant industry characteristics. The Fair Ratio for Diamondback stands at 17.2x, well above the company’s current mark. Since Diamondback’s PE is notably below its Fair Ratio, it suggests the shares are trading at a discount relative to what you might expect if all the fundamentals were fully priced in.

Result: UNDERVALUEDNasdaqGS:FANG PE Ratio as at Oct 2025

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

Upgrade Your Decision Making: Choose your Diamondback Energy Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. Narratives allow you to frame your investment decision by telling a concise story about Diamondback Energy, putting your own assumptions about its future revenue, earnings, and profit margins front and center, rather than relying only on standard ratios or analyst models.

In practice, a Narrative links your perspective on the business to a detailed financial forecast and an estimated fair value. This makes it much easier to connect the company’s story to its numbers. On Simply Wall St’s Community page, this tool is accessible to all investors and millions already use it to share and compare their outlooks. Narratives empower you to see at a glance whether Diamondback’s current price is a bargain or a warning sign by comparing Fair Value to today’s share price, and they refresh automatically as new information or news becomes available.

For example, two investors may craft different Narratives for Diamondback. One might project strong cash flow and set a bullish fair value of $222.00 per share, while another, with more cautious outlooks for oil prices or growth, could estimate a fair value of $143.00. This allows you to see not just the average analyst view, but also the spread of real, data-driven convictions in the market.

Do you think there's more to the story for Diamondback Energy? Create your own Narrative to let the Community know!NasdaqGS:FANG Community Fair Values as at Oct 2025

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 FANG.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

View Comments