Key Takeaways:
- Price Target: The valuation model indicates Snam stock could reach €7 by 2027, supported by regulated revenue growth and stable infrastructure returns.
- Upside Potential: From the current price of €6, this implies roughly 14% total upside as earnings expand without multiple re-rating.
- Return Profile: The model projects approximately 7% annualized returns over the next 2 years.
- Margin Stability: Operating margins around 48% reflect the strength of regulated cash flows across Snam’s 40,000-kilometer gas network.
Snam S.p.A. (SRG) operates over 40,000 kilometers of regulated natural gas infrastructure across Europe and the UK, a scale that anchors stable cash flows and predictable earnings visibility.
Snam strengthened its strategic footprint by expanding carbon capture projects alongside Eni and BlackRock and issuing €500 million in green bonds to finance regulated and transition-focused infrastructure.
Revenue growth normalized to about 7% in the current forecast period, reflecting tariff-linked expansion and incremental contributions from storage, regasification, and energy transition activities.
Operating margins near 48% highlight the efficiency of Snam’s regulated asset base, translating infrastructure scale into resilient profitability despite limited volume growth.
With a €6 billion market capitalization and a 13x earnings multiple, Snam continues to price in caution which create tension between steady execution and valuation assumptions.
What the Model Says for SRG Stock
Snam’s valuation depends on stable regulated cash flows and disciplined execution across gas transport, storage, and transition assets through 2027, within a highly specialized gas utilities business that makes standard valuation comparisons less applicable.
Based on 6.7% revenue growth, 47.9% operating margins, and a 12.6× exit multiple, the model reflects stable earnings quality rather than valuation expansion.
This model points to a €6.54 target price, implying a 14.2% total return and a 7% annualized return over the next two years.
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for SRG stock:
1. Revenue Growth: 6.7%
Snam’s revenue profile reflects regulated infrastructure economics, with long-term growth historically tracking allowed returns rather than volume expansion across its gas transport and storage network.
Recent growth has settled around 5% annually after last year’s 17% revenue decline, as regulated tariffs steady cash flows while regasification capacity and transition projects add incremental growth.
Forward growth is supported by regulated asset base expansion, biomethane projects, and carbon capture partnerships, while limits remain from mature gas demand and strict regulatory oversight.
A 6.7% revenue growth assumption reflects steady regulated cash flows alongside gradual contribution from transition assets, supporting an overall return profile of about 7% per year.
2. Operating Margins: 47.9%
Snam has historically operated with elevated margins due to regulated cost recovery, with operating margins ranging above 50% during periods of favorable tariff resets and lower cost inflation.
Operating margins fell from about 53% to around 48%, as higher operating and investment costs reduced profitability, while the regulated framework still protected baseline earnings.
Efficiency remains anchored by scale, long-duration contracts, and inflation-linked tariffs, while margin upside is constrained by regulatory caps and rising maintenance requirements.
Operating margins of 47.9% represent normalized profitability within Snam’s regulated framework, sustaining reliable cash generation and aligning with an expected annualized return of roughly 7%.
3. Exit P/E Multiple: 12.6x
Snam’s valuation has historically traded between roughly 12x and 14x earnings, reflecting its defensive profile, regulated earnings visibility, and income-oriented investor base.
Current market pricing embeds caution around long-term gas demand and regulatory risk, even as earnings stability and balance sheet discipline remain intact.
For valuation to hold, regulated returns must remain predictable and transition investments must scale without diluting returns, while multiple expansion remains limited by utility-like characteristics.
A 12.6× exit multiple assumes stable earnings quality without valuation expansion, which supports a €6.54 target price and an annualized return near 7%.
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What Happens If Things Go Better or Worse?
Snam’s outcomes depend on regulated tariff stability, disciplined capital allocation, and execution of transition investments, creating distinct performance paths through 2029.
- Low Case: If gas volumes remain flat, transition projects ramp slowly, and regulatory returns dominate earnings, revenue grows around 4.3%, net margins stay near 31.6%, valuation stays compressed, and upside relies mainly on income stability → 1.7% annualized return.
- Mid Case: With regulated transport and storage performing as expected and carbon capture and biomethane adding incremental growth, revenue growth near 4.8%, margins improving toward 33.6%, and stable valuation support steady compounding → 6.9% annualized return.
- High Case: If transition assets scale efficiently, utilization improves, and cost discipline holds, revenue reaches about 5.2%, margins approach 35.1%, valuation pressure eases, and capital appreciation accelerates → 11.3% annualized return.
Returns depend mainly on steady execution in regulated assets and transition projects, where consistent delivery and cost control matter more than market sentiment or growth headlines.
The €7.47 mid-case target price can be reached by 2029 through steady revenue growth and better margins, without needing higher valuation multiples or market hype.
How Much Upside Does It Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
