Texas Pacific Land Corporation (TPL)

Conclusion

Texas Pacific Land Corporation owns land and mineral royalty interests in the Permian Basin and runs water services for oil and gas operators there. At 278.28 USD on 2026-11-09, the shares give a market capitalisation of 19.2 billion USD.

The verdict is fair. Today's P/E of 32.7 sits below its ten-year median of 40.0, and the price-to-free-cash-flow of 33.7 sits below 42.9. The DCF gives 337.40 USD per share at a discount rate of 8.9%. The fair value band runs from 273.07 to 409.60 USD with a midpoint of 341.34 USD, a margin of safety of 22.7% at the current price. The reverse DCF implies growth of 12.7% a year, against revenue growth of 21.4% over five years and 6.2% over three years.

The strongest numbers are the net cash position, with net debt to EBITDA at -0.44, a ROIC of 40.0% against a WACC of 8.9%, and free cash flow conversion of 96.9% on a trailing basis. The weakest are the three-year revenue CAGR of 6.2%, the three-year EPS CAGR of 2.8% and the Piotroski score of 4 out of 9. If growth stays at the recent three-year pace, the case rests on the valuation rather than on momentum.

Financial health

Financial strength is green, held up by the net cash position, the current ratio and interest coverage. The company holds net cash, with net debt to EBITDA at -0.44, a current ratio of 5.41 and a quick ratio of 5.27. Debt to equity is 0.0085, and interest coverage is 1,064.5 times on a trailing twelve-month basis. The Altman Z-score is 65.3, in the safe zone. The Altman model was designed for manufacturers, and this company is not one, so the reading is only indicative. Insolvency risk: low, about 0.0% by the estimate of the Ohlson model over one to two years.

Earnings quality

Earnings quality is yellow: cash conversion and buybacks are strong, while the Beneish reading and the Piotroski score pull it down. Free cash flow conversion is 96.9% on a trailing basis and 98.5% over five years, and the accrual ratio is -0.045. Stock-based compensation is 1.8% of revenue, and free cash flow after it is 551.7 million USD. The share count changed at a compound rate of -0.22% over five years, which reflects buybacks. The Piotroski score is 4 of 9. The Beneish M-score is -1.06, a reading that points to likely manipulation. Over the last eight quarters the company beat estimates six times and missed twice, with an average surprise of 23.6%. Estimate revisions are mixed: the current-year estimate rose 6.8% over 90 days and the next-year estimate rose 5.3%, with one downward revision in the last 30 days for each year.

Profitability

Profitability is yellow: returns on capital are very high, while margins sit below their ten-year medians. Operating margin is 75.6% against a median of 81.1%, gross margin is 70.3% against 93.7%, and net margin is 60.7% against 63.2%. Margin stability is 0.08. ROIC is 40.0% against a WACC of 8.9%, with a ROIC minus WACC value of 31.1%, which creates value. The five-year median ROIC is 120.1%. Return on equity is 32.6%. The DuPont split shows a net margin of 60.3%, asset turnover of 0.49 and an equity multiplier of 1.11, so leverage plays little role in the return on equity.

Growth

Growth is green, supported by strong compound growth over five and ten years. Revenue compounds at 21.4% over five years and 26.0% over ten, but only 6.2% over three years. EPS compounds at 2.8% over three years, against 22.6% over five and 26.2% over ten. Free cash flow per share compounds at 4.8% over three years, 21.6% over five and 26.6% over ten. Revenue grew in 7 of 10 comparable years. The recent three-year pace is much slower than the long-run record. The next-year earnings estimate figure is not available, so the forward view rests on the estimate revisions shown under earnings quality.

Valuation

Valuation is yellow: today's multiples sit below their ten-year medians, but the fair value rests on fixed model assumptions. The current P/E is 32.7 against a median of 40.0, a premium of -18.3%. EV/EBITDA is 23.3 against 25.8, a premium of -9.9%. Price-to-free-cash-flow is 33.7 against 42.9, a premium of -21.4%. Price-to-sales is 19.8 against 24.6, a premium of -19.4%, and price-to-book is 10.7 against 19.4, a premium of -45.0%. The DCF gives 337.40 USD per share at a discount rate of 8.9%, and 63.2% of that value comes from the terminal value. The fair value from historical multiples is 345.28 USD. The reverse DCF implies 12.7% growth a year, against revenue growth of 21.4% over five years. The fair value band is an estimate built on fixed assumptions, not a price target. The dividend yield is 0.84%, the forward yield 0.88%, and the payout on free cash flow 28.4%.

Risks

The weak numbers point to specific risks. A slower growth path would matter most: the three-year revenue CAGR of 6.2% and EPS CAGR of 2.8% are far below the long-run record, and the reverse DCF shows the current price needs 12.7% growth a year. Margins below their medians, with gross margin at 70.3% against 93.7%, leave less room if prices or costs move. The Beneish reading of -1.06 points to possible earnings manipulation, and a Piotroski score of 4 of 9 shows few tests passed; both call for checking the reported figures. Next-year estimates saw one downward revision in the last 30 days. The debt maturity schedule and revenue by segment are not available, so refinancing risk and the mix of the business cannot be tested here. The DCF and the fair value band depend on fixed assumptions, and the valuation medians cover only ten years.