Targa Resources Corp. is a midstream energy infrastructure company that processes and transports hydrocarbons and currently presents a profile of strong cash generation and high operating margins alongside elevated leverage and quarter-to-quarter earnings volatility.
The company generates substantial operating cash flow that exceeds reported earnings, with trailing twelve‑month operating cash flow of $3.70B versus trailing net income of $2.40B, supporting an operating cash flow-to-net income ratio of about 1.54 (Earnings Quality Analysis).
Profitability is notable on several metrics — the most recent reported gross margin is 127.2% and operating margin about 16.5%, while quarterly return on equity surged to 76.6% (Profit Margin Trends, Return on Equity (ROE)).
Notable weaknesses include balance‑sheet and liquidity risks: the current ratio is low at 0.718, and the debt‑to‑equity ratio is high at about 6.10, indicating significant leverage that contrasts with a net‑debt metric close to zero relative to owner earnings (0.00) (Strategic Capital Allocation).
Earnings and net income have been volatile in recent quarters — net income jumped to $1.29B in the 2025‑12‑31 quarter and then fell to $479.6M in 2026‑03‑31 — and ROE growth is negative (about -99.7%), signaling that recent high ROE levels may reflect transient factors rather than steady improvement (Revenue & Net Income, Return on Equity).
Key fundamentals include operating cash flow versus net income (TTM OCF $3.70B vs net income $2.40B) and the company's cash conversion ratio (~1.79) for earnings quality trends (Earnings Quality Analysis).
Additionally, leverage and liquidity measures (current ratio 0.718 and debt/e‑quity ~6.10) and any changes in financing cash flow (financing CFF turned positive to $1.24B in the most recent TTM) should be monitored as they could alter debt dynamics (Strategic Capital Allocation).
Also track EPS and revenue‑per‑share trends alongside the trailing PE, which has moved to 24.1x in the latest quarter (EPS Diluted & Revenue per Share, Price-to-Earnings (PE) Ratio Trend).
The foundation of business quality and long-term value creation
Targa Resources Corp.'s recent net income shows marked quarter-to-quarter variability. Net income rose from $275.2M in the quarter ended 2024-03-31 to $629.1M (2025-06-30) and then jumped to $1.29B in the quarter ended 2025-12-31 before declining to $479.6M in the quarter ended 2026-03-31, indicating a pronounced peak in Q4 2025 followed by a reduction in Q1 2026. Earlier quarters through 2023 displayed smaller positive and negative swings (for example $628.9M in 2023-12-31 and $220.0M in 2023-09-30).
Revenue data in the set is most recently reported for the quarter ended 2024-12-31 at $16.38B, which is substantially larger than the historical revenue points provided from 2012–2018 (typically in the $1–3B range). The most recent net income was $479.6M (quarter ended 2026-03-31). The most recent revenue was $16.38B (quarter ended 2024-12-31).
Why Growth Matters
Consistent revenue and earnings growth are the lifeblood of successful long-term investments. Companies that can grow their top line (revenue) and bottom line (net income) over many years demonstrate they have products or services customers value and are willing to pay for repeatedly.
Revenue Growth shows whether the company is expanding its market reach, gaining market share, or successfully launching new products.Net Income Growth demonstrates the company can convert that revenue into actual profits while managing costs effectively.
Look for steady, sustainable growth rather than erratic spikes. The best businesses compound earnings year after year, creating tremendous value for shareholders over time. Companies that can grow earnings faster than revenue are improving their profitability—a sign of operational excellence and competitive strength.
Year-over-year growth rates for revenue and earnings per share
Reading the Growth Rate Chart
This chart converts the absolute per-share figures into year-over-year percentage changes, making it easy to see whether growth is accelerating, decelerating, or reverting to trend — regardless of the company's absolute size.
Revenue per Share Growth (1-year, split-adjusted) measures how quickly the top line is expanding on a per-share basis. Sustained positive growth signals that the company continues to win customers and grow its addressable market.EPS Diluted Growth (1-year, split-adjusted) measures how quickly earnings are compounding for each shareholder. When EPS growth consistently outpaces revenue growth, operating leverage and margin expansion are at work.
Look for consistency, not just magnitude. A company that reliably grows EPS 10–15% per year is far more valuable than one that alternates between 50% spikes and deep contractions. Negative EPS growth during a period of positive revenue growth is a red flag — costs are rising faster than sales. Quarters where both lines converge near zero or go negative deserve close scrutiny.
How revenue converts to net income for the most recent annual period
Over the period Jan 2024 to Dec 2024, Targa Resources Corp generates $16.38B in revenue. The waterfall below shows how revenue flows through various expense categories.
Period Information
Report Type: Annual (10-K)
Period: Jan 2024 to Dec 2024
Analyzing long-term margin stability and competitive positioning
Targa Resources Corp.'s trailing gross margin history in the dataset shows a long period of mid‑teens results in the 2011–2013 range (roughly 14–18%), some lower single‑digit readings in parts of 2014, and modest recovery to the low‑teens in 2016–2017. The most recent gross margin observation is a large increase to 127.2% for the period ending 2024‑12‑31. Operating margin is reported most recently at 16.5% for the same 2024‑12‑31 period.
The series includes extreme data points that diverge sharply from surrounding quarters (notably a gross margin value of -87,986.2% and a net margin value of 5,287.5% reported for 2014‑12‑31), which appear as marked anomalies in the record.
Net profit margin data in the file is sparser and concentrated in 2013–2015, showing several deeply negative quarters in 2014–2015 (for example -52.7% on 2015‑03‑31, -25.6% on 2015‑06‑30, -9.2% on 2015‑09‑30) and a return to a small positive margin of 0.9% on 2015‑12‑31. No more recent net profit margin observations are included in the dataset. The latest observed values are: Gross Margin 127.2% (2024‑12‑31), Operating Margin 16.5% (2024‑12‑31), Net Profit Margin 0.9% (2015‑12‑31).
Understanding Profit Margins
Between Jan 2024 and Dec 2024, Targa Resources Corp converts every dollar of revenue through the following stages:
Sustainable competitive advantages reveal themselves through consistently superior profit margins over extended periods. Companies with durable economic moats maintain pricing power and operational efficiency that competitors struggle to match.
A sign of durable competitive advantage is earning sustained higher margins than competitors.Look for margins that remain stable or improve over time, especially during economic downturns. Declining margins may signal increasing competition, pricing pressure, or deteriorating business fundamentals.
Comparing reported earnings to actual cash generation
In the most recent trailing‑twelve‑month readings, Targa Resources Corp.'s operating cash flow remains above net income but the relationship changed over the last quarter. Operating cash flow fell from $3.92B (TTM as of 2025‑12‑31) to $3.70B (TTM as of 2026‑03‑31), while net income rose from $1.92B to $2.40B over the same two TTM points, narrowing the cash-versus-earnings gap from about $2.00B to about $1.30B.
Looking further back, both metrics have increased materially from earlier years: operating cash flow was \$761.8M (TTM as of 2014‑12‑31) and moved into the multi‑billion dollar range more recently, while net income swung from losses (−\$1.55B TTM in 2020) and low positives (e.g., $71.2M TTM in 2021) to $1.35B TTM in 2023 and then higher. The most recent trailing‑twelve‑month operating cash flow was $3.70B and the most recent trailing‑twelve‑month net income was $2.40B.
The Earnings vs. Cash Flow Gap
Reported earnings (Net Income) doesn't always reflect actual cash generation. Companies use accrual accounting, which recognizes revenue when earned and expenses when incurred—not when cash actually changes hands. This creates timing differences and opportunities for accounting discretion that can mask underlying business health.
Net Income (the "earnings" number) can be influenced by non-cash items like depreciation, stock-based compensation, and changes in accounting estimates.Operating Cash Flow, however, shows the actual cash the business generates from its core operations—a harder number to manipulate.
Trailing Twelve Months
What to Look For
Key Insight: Companies with durable competitive advantages typically show operating cash flow that meets or exceeds net income over time, demonstrating they convert accounting profits into actual cash that can be returned to shareholders or reinvested in the business.
Measuring management's efficiency at generating profits from shareholder capital
Targa Resources Corp.'s reported ROE data are volatile across the available periods. The series includes an extreme high of 249.1% at year-end 2014, followed by much lower outcomes including a negative ROE of -4.3% at year-end 2019 and modest positive ROEs of 3.5% (2021-12-31) and 6.5% (2023-12-31).
The most recent quarter (period ending 2026-03-31) shows a sharp rise to 76.6%, the highest level in the dataset since the 2014 peak and substantially above the intervening single-digit figures. The most recent quarterly Return on Equity for Targa Resources Corp. was 76.6%.
The Gold Standard of Profitability
Return on Equity (ROE) is a powerful measure of how effectively a company's management is using the money shareholders have invested. Calculated by dividing Net Income by Shareholders' Equity, it reveals how much profit is generated for every dollar of equity capital.
A consistently high ROE (typically above 15-20%) is often the signature of a "quality" business with a durable competitive advantage. It indicates that the company can generate high returns on its own capital, which it can then reinvest at these high rates to compound value over time.
What to Look For:
How the company generates and deploys its cash
Targa Resources Corp.'s trailing twelve-month operating cash flow remains the dominant line item, but it slipped from $3.92B for the TTM ended 2025-12-31 to $3.70B in the TTM ended 2026-03-31.
Financing cash flow shows a clear recent inflection: several prior TTMs were negative (for example -$266.6M at 2025-12-31, -$529.5M at 2025-03-31 and -$612.8M at 2024-12-31) before turning positive at $1.24B in the TTM ended 2026-03-31.
Investing cash flow in the available history is consistently negative, with the most recent investing TTM reported at -$473.2M for period end 2021-12-31 and earlier larger outflows in 2020 and 2018.
The most recent observed values are:
Understanding Company Strategy
Capital allocation refers to how management decides to spend and invest the company's cash. Analyzing the three primary categories of cash flow reveals a company's true operational strategy:
What to look for: Is the company bootstrapping (funding growth solely from operating cash)? Are they borrowing to fund aggressive expansion or dividends? Or are they capital raising by issuing new shares, potentially diluting your ownership? A healthy, mature company typically generates strong operating cash, moderately invests in growth, and returns the surplus to shareholders through financing activities.
Trailing Twelve Months
Net assets attributable to each share — the accounting floor of intrinsic value
Why Book Value per Share Matters
Book value per share is the net worth of the company — total assets minus total liabilities — divided by shares outstanding (split-adjusted). It represents the theoretical liquidation value per share if every asset were sold and every liability repaid at balance-sheet carrying values. It is the accounting foundation upon which much of equity valuation is built.
A steadily rising book value per share is one of the most reliable signals of compounding wealth creation. It means the company is retaining earnings and building net worth faster than it is returning capital or eroding it. Warren Buffett famously tracked Berkshire Hathaway's book value per share for decades as his primary measure of intrinsic value growth.
Context is essential. Asset-heavy businesses (banks, manufacturers, utilities) should be judged by book value more directly than asset-light businesses (software, consumer brands), where intangible assets like intellectual property and customer loyalty may far exceed their balance-sheet carrying values. A company trading at a large premium to book value is not necessarily overvalued — it may simply possess competitive advantages that accounting rules do not capture. Conversely, a declining book value per share — especially over multiple years — is a serious warning sign of capital destruction.
How much of the company is financed by debt versus shareholders' equity
Reading the Debt-to-Equity Ratio
The debt-to-equity (D/E) ratio compares total financial debt to shareholders' equity. A ratio of 1.0 means the company has borrowed one dollar for every dollar of equity; a ratio of 2.0 means it has borrowed twice as much as it owns. Financial leverage amplifies both returns and risk: in good times, debt turbocharges equity returns; in bad times, it accelerates losses and can threaten solvency.
Trends matter more than a single number. A rising D/E ratio can mean the company is taking on debt to fund growth — potentially value-creating if returns exceed the cost of capital. But it can also mean equity is being eroded through losses or that the business is borrowing simply to sustain operations. A falling D/E ratio generally reflects strengthening financial health: earnings are being retained, debt maturities are being paid down, or both.
Industry norms vary enormously. Capital-intensive sectors (utilities, real estate, financials) routinely carry high D/E ratios that would be alarming in, say, a technology company. Always compare against sector peers. As a rough rule of thumb, a D/E above 2× in a cyclical business warrants careful scrutiny of interest coverage and refinancing risk.
Short-term liquidity — can the company cover its near-term obligations?
Liquidity: Can the Business Pay Its Bills?
The current ratio is calculated as current assets divided by current liabilities. A ratio of 1.5 means the company has $1.50 of short-term assets — cash, receivables, inventory — for every $1.00 of obligations due within the next twelve months. It is the most direct measure of near-term financial resilience: can the business meet its obligations without needing to raise new capital or sell long-term assets at a discount?
A ratio above 1.0 is generally healthy, meaning current assets exceed current liabilities. A ratio consistently above 2.0 may indicate the company is holding excess cash or inventory that could be deployed more productively. A ratio below 1.0 is a warning sign — the company is relying on future cash generation or external financing to cover its near-term obligations, which is manageable in normal conditions but dangerous during a downturn.
Trends and context matter.A declining current ratio isn't always alarming — highly efficient businesses (e.g., large retailers with reliable daily cash flows) often run leaner balance sheets intentionally. Conversely, a rapidly rising current ratio can signal slowing sales causing inventory to build, or customers taking longer to pay. Always compare the trend against industry peers and cross-reference with the cash flow statement to assess whether the business is genuinely liquid or just holding non-cash current assets.
How much the market is paying for each dollar of company earnings
Targa Resources Corp.'s trailing twelve-month price-to-earnings ratio has risen over the most recent reported quarters, moving from 14.8x at the 2023-12-31 period to 22.2x at 2025-12-31 and 24.1x at 2026-03-31. The most recent three data points show a clear upward trend in the PE ratio, with the latest quarter at 24.1x.
Earlier in the series there are pronounced peaks and some gaps: the PE spiked to 169.6x at 2021-12-31 and was elevated across 2013–2015 (for example, 101.2x at 2013-12-31 and 107.3x at 2015-12-31), while the 2019-12-31 and 2020-12-31 entries are blank/undefined in the dataset. The most recent reported PE ratio for Targa Resources Corp. (period ending 2026-03-31) was 24.1x.
What Is the PE Ratio?
The Price-to-Earnings (PE) ratio is one of the most widely used valuation metrics in investing. It divides the current stock price by the company's earnings per share (EPS), revealing how much investors are willing to pay for each dollar of earnings. A high PE can signal that the market expects strong future growth, while a low PE may suggest undervaluation—or reflect genuine concerns about the company's prospects.
Context matters:PE ratios vary significantly across industries. High-growth technology companies routinely trade at PE ratios above 30x or 40x, while mature, low-growth sectors like utilities or financials often trade closer to 10–15x. Always compare a company's PE to its own history and its industry peers, not just an absolute number.
What to Look For:
Key Insight:The PE ratio is a snapshot of market sentiment and expectations. Tracking it over time alongside earnings trends reveals whether the market's valuation has expanded or contracted—and whether that change is justified by fundamentals.