As of June 21, 2025, Holly Energy Partners LP's estimated intrinsic value ranges from $19.35 to $30.10 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $25.26 | +23.5% |
| Discounted Cash Flow (5Y) | $21.97 | +7.4% |
| Dividend Discount Model (Multi-Stage) | $22.38 | +9.4% |
| Dividend Discount Model (Stable) | $30.10 | +47.2% |
| Earnings Power Value | $19.35 | -5.4% |
Is Holly Energy Partners LP (HEP) undervalued or overvalued?
With the current market price at $20.45, the stock appears to be moderately undervalued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Holly Energy Partners LP's intrinsic value, including:
The cost of capital is a critical factor in valuation models, representing the required return for investors.
| WACC Component | Low | High |
|---|---|---|
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.86 | 1.02 |
| Cost of equity | 7.8% | 10.6% |
| Cost of debt | 4.4% | 7.5% |
| Tax rate | 26.2% | 27.0% |
| Debt/Equity ratio | 0.63 | 0.63 |
| After-tax WACC | 6.0% | 8.6% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $22 | $4,300M | 83.3% |
| 10-Year Growth | $25 | $4,716M | 68.4% |
| 5-Year EBITDA | $13 | $3,182M | 77.4% |
| 10-Year EBITDA | $17 | $3,706M | 59.8% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $282M |
| Discount Rate (WACC) | 8.6% - 6.0% |
| Enterprise Value | $3,272M - $4,667M |
| Net Debt | $1,522M |
| Equity Value | $1,749M - $3,144M |
| Outstanding Shares | 126M |
| Fair Value | $14 - $25 |
| Selected Fair Value | $19.35 |
| Metric | Value |
|---|---|
| Market Capitalization | $2586M |
| Enterprise Value | $4108M |
| Trailing P/E | 10.81 |
| Forward P/E | 13.76 |
| Trailing EV/EBITDA | 9.30 |
| Current Dividend Yield | 685.31% |
| Dividend Growth Rate (5Y) | -10.50% |
| Debt-to-Equity Ratio | 0.63 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $7.58 |
| Discounted Cash Flow (5Y) | 25% | $5.49 |
| Dividend Discount Model (Multi-Stage) | 20% | $4.48 |
| Dividend Discount Model (Stable) | 15% | $4.51 |
| Earnings Power Value | 10% | $1.94 |
| Weighted Average | 100% | $23.99 |
Based on our comprehensive valuation analysis, Holly Energy Partners LP's weighted average intrinsic value is $23.99, which is approximately 17.3% above the current market price of $20.45.
Key investment considerations:
Given these factors, we believe Holly Energy Partners LP is currently moderately undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.