Diamondback Energy, Inc. (FANG): what the price requires
At today's price, Diamondback Energy, Inc. (FANG) is priced for +8.4% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/FANG
Headline
| Field | Value |
|---|---|
| Ticker | FANG |
| Company | Diamondback Energy, Inc. |
| Current price | $191.78/sh |
| Composition | Oil sales 77% / Natural gas liquid sales 10% / Sales of purchased oil 10% / Natural gas sales 3% / Other operating income 1% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 5.2% |
| Operating margin today | 26.2% |
| Margin compression implied | -21.0pp |
| Implied growth | 8.4% |
| Multiple paid | 16x operating income |
The operating-margin requirement is derived from the framework's value band at year 5, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 9% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.4pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.29σ |
| cohort percentile (of 45 peers) | 56 |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 10.63x | 2 | expensive |
| Earnings | 3.26x | 3 | expensive |
| Relative | 3.11x | 3 | expensive |
| Growth | 0.87x | 3 | justifies |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.2%); the inversion above states its own rate.
Per-Model Detail (n=11)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $655.95 | 0.29x | yes | FCF base $8.2B, growth 23% (input: historical growth), terminal g 4.0%, WACC 8.2%, 5yr projection |
| DCF Exit Multiple | Growth | $221.54 | 0.87x | yes | Exit EV/EBITDA: 8.7x / 13.7x / 18.7x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $61.76 | 3.11x | yes | P/E 22x (blended: static sector reference 10x + trailing (TTM) 191x), scenarios: 16.5x / 22.0x / 26.4x (bear / base = reference held flat / bull), EV/EBITDA 8.32x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $10.86 | 17.66x | yes | BV/sh $128.97, ROE (TTM) 0.8%, ke 9.3% |
| Two-Stage Excess Return | Asset | $5.67 | 33.82x | yes | 5yr excess ROE then converge to ke=9.3% (excluded from median) |
| Discounted Future Market Cap | Growth | $145.02 | 1.32x | yes | Rev $15.2B, growth 23% (input: historical growth; tapered), Terminal P/S: 2.7x / 3.6x / 4.3x (bear / base = today's held flat / bull, cap 6x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $58.78 | 3.26x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $4.06B × (1−18%) / WACC 8.2% → EPV (no growth) |
| Residual Income | Asset | $4.02 | 47.71x | yes | BV $128.97 + 5yr PV of (ROE (TTM) 0.8% − Kₑ 9.3%) × BV; BV grows 0.5%/yr (excluded from median) |
| Graham Number | Asset | $53.33 | 3.60x | yes | √(22.5 × EPS $0.98 × BVPS $128.97) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $56.35 | 3.40x | yes | EBITDA $4.94B × sector EV/EBITDA 6.0x |
| FCF Yield | Earnings | $266.13 | 0.72x | yes | FCF $8231.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $0.82 | 233.88x | yes | EPS $0.98 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | $2.97 | 64.57x | yes | BV $128.97 × (ROIC 0.2% / WACC 8.2%) (excluded from median) |
| P/Sales Sector | Relative | $64.58 | 2.97x | yes | Revenue $15.22B × sector P/S 1.2x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $10.59 | 18.11x | yes | EPS $0.98 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $14.5b |
| Net debt / NOPAT (after-tax) | 4.25x |
| Net debt / operating income (pre-tax) | 3.48x |
| Share count CAGR (dilution) | 12.2% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
At $183.59 (as of June 27, 2026) Diamondback is priced at about 16x company-wide operating income, implying only about 6.6% operating growth a year, within its recent pace; the asset, earnings-power, and peer-multiple families all read it as richly valued, while only the growth-DCF reaches the price, which is the normal shape for a reserve-based E&P.
The case rests on Permian reserve quality: a long-life, low-cost inventory that lets the company hold or grow output cheaply, with Q1 2026 production above 520,000 barrels of oil per day and 2026 guidance raised to about 972 thousand barrels of oil equivalent per day.
The risks are depletion and commodity price: a $1.4 billion non-cash ceiling-test impairment cut Q1 GAAP net income to $25 million from $1,405 million, net debt sits near $14.5 billion, and the share-count CAGR near 12% means per-share value compounds slower than headline production.
Bull Case
Valuing an exploration-and-production company is its own discipline, because the asset is a depleting reserve base and the earnings are a leveraged bet on a commodity nobody at the company controls. Static frames built for stable businesses tend to misprice E&P: an asset-based read keys off book value that lags current reserve economics, and an earnings-power read gets whipsawed by non-cash impairments. Diamondback fits that pattern. The asset, earnings-power, and peer-multiple families all flag it as richly valued; only the growth-DCF reaches the price. For an E&P, that is the right family to lean on, because what you are buying is the present value of future barrels, not last year's accounting profit.
The reason the growth lens works here is reserve quality. Diamondback's filing describes a Permian Basin position with an extensive production history, a favorable operating environment, mature infrastructure, long reserve life, and multiple producing horizons, reported as a single upstream segment (accession 0001539838-25-000021). A long-life, low-cost Permian inventory is the closest thing E&P has to a moat: it lets the company keep production flat or growing at a lower break-even than higher-cost basins, which is what converts a volatile commodity into durable free cash flow.
The recent operating numbers back the durability case. First-quarter 2026 adjusted EPS was $4.23, beating consensus by 13%, on revenue of $4.24 billion, and the company produced more than 520,000 barrels of oil per day, beating its own plan; management raised 2026 production guidance to about 972 thousand barrels of oil equivalent per day and is adding rigs and a completion crew. At $183.59 the price implies operating growth of only about 6.6% a year, within what Diamondback has recently delivered, and the inversion reads the stretch as duration rather than rate. A low-cost operator that can hold or grow output cheaply, valued on a modest growth bar, is a reasonable way to own the Permian.
Bear Case
The advantage Diamondback sells, a long-life, low-cost Permian inventory, is a wasting asset by definition, and the bear case is that the moat erodes barrel by barrel. Every well drilled depletes the best rock first, so maintaining production means continually replacing inventory at progressively higher cost. The $1.4 billion non-cash ceiling-test impairment in the first quarter is the accounting acknowledging exactly this kind of pressure: it pushed GAAP net income down to $25 million from $1,405 million a year earlier. The impairment is non-cash and tied to price-deck mechanics, but it is a reminder that the carrying value of the reserve base is only as good as the commodity price that underwrites it, and that price is outside the company's control.
The valuation is stretched against every static frame for a reason. The asset, earnings-power, and peer-multiple families all read the stock as expensive, and only the growth-DCF reaches the price. That means the entire investment case rests on durable compounding the other frames structurally cannot price. If reserve quality fades faster than expected, or if oil prices sit lower for longer, the growth lens that justifies the price loses its support and the stock falls back toward the asset and earnings-power reads, which sit well below today's level. Trailing operating income on the EDGAR basis is actually slightly negative (about minus $291 million), distorted by the impairment, which is itself a caution about how lumpy the reported economics are.
Two structural items deepen the caution. Net debt sits near $14.5 billion, a real obligation that must be serviced through the commodity cycle, and the share-count CAGR is around 12%, reflecting stock issued to fund acquisitions; that dilution means per-share value grows more slowly than headline production. Diamondback is accelerating activity (adding rigs and a completion crew) into a market where it cannot set the price of its product, so it is spending more to grow volume just as the static valuation frames say the price already assumes a good outcome. The bear's summary: this is a high-quality operator whose quality is finite, levered to a price it does not control, valued on the one optimistic frame.
Valuation
Diamondback is priced at about 16x company-wide operating income, which inverts to roughly 6.6% operating-income growth a year for five years at an 8.9% cost of capital. The model reads that as within range: the near-term pace is within what the company has recently delivered, and the price sits in the upper half of the peer-multiple range.
That low growth-based price is in sharp tension with the static frames, and the tension is the signal. The asset, earnings-power, and peer-multiple families all flag the stock as richly valued; only the growth-DCF reaches the price. In E&P that ordering is not a contradiction, it is the nature of the business: book value and trailing earnings understate a long-life reserve base, while a forward cash-flow model that credits durable, low-cost production produces a much higher number. The honest framing is that the stock is cheap if you believe the reserve quality and break-even advantage persist, and expensive if you do not.
The judgment call is therefore about durability, not arithmetic. The bull pays for the Permian inventory and the company's demonstrated ability to grow output at modest cost; the bear notes that the inventory depletes, the $1.4 billion impairment shows the carrying value is price-sensitive, and net debt near $14.5 billion plus a roughly 12% share-count CAGR mean per-share value compounds slower than production. One measurement caution: trailing operating income on the EDGAR basis is slightly negative because of the impairment, so the operating-income multiple is best read off normalized, mid-cycle figures rather than the distorted trailing number, and the implied 6.6% growth should be treated as approximate.
Catalysts
The defining recent catalyst was the first-quarter 2026 report (early May 2026). Diamondback delivered adjusted EPS of $4.23, beating the $3.75 consensus by 13%, on revenue of $4.24 billion, up about 5% year over year. The clean headline was offset by a $1.4 billion non-cash ceiling-test impairment that pushed GAAP net income down to $25 million from $1,405 million a year earlier (StockTitan, ad-hoc-news, TIKR).
On operations, the company produced more than 520,000 barrels of oil per day in the quarter, ahead of its own expectations, and average production was about 979 thousand barrels of oil equivalent per day. Management raised 2026 production guidance to roughly 972 thousand barrels of oil equivalent per day and announced a strategic acceleration in the Permian, adding rigs and a completion crew with an operational baseline at or above 520 thousand barrels of oil per day (AOL, Motley Fool, Simply Wall St).
The forward catalysts are commodity-driven and operational. The oil price path is the single biggest swing factor, since it sets both realized revenue and the carrying value that drives ceiling-test impairments. On the controllable side, the activity acceleration is the thing to watch: whether the added rigs and completion crew translate into the guided production without inflating per-barrel cost, and whether capital returns (dividends and buybacks) continue at a pace that offsets the elevated share count. The next quarterly print is the test of both (Motley Fool, TIKR).
Peer Cohorts (Per Segment, With Filing Citations)
Upstream (single reportable segment) (reported)
- CHRD (Chord Energy Corp)
- (no filing in the citation store)
- CRGY (Crescent Energy Company)
- (no filing in the citation store)
- CRC (California Resources Corp)
- (no filing in the citation store)
- CTRA (COTERRA ENERGY INC.)
- (no filing in the citation store)
- EOG (EOG RESOURCES, INC.)
- (no filing in the citation store)
- APA (APA Corporation)
- (no filing in the citation store)
- AR (ANTERO RESOURCES CORPORATION)
- (no filing in the citation store)
- RRC (RANGE RESOURCES CORPORATION)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.