Texas Pacific Land Corporation (TPL): A Bull Case Theory

Yahoo

3 hours ago

We came across a bullish thesis on Texas Pacific Land Corporation (TPL) on The ROI Club's Substack. In this article, we will summarize the bulls' thesis on TPL. Texas Pacific Land Corporation (TPL)'s share was trading at $1110.14 as of 2nd June. TPL's trailing and forward P/E were 55.53 and 37.74 respectively according to Yahoo Finance.
Aerial shot of the rugged landscape of Yukon, Canada reflecting the exploration for mineral properties.
Texas Pacific Land Corporation (TPL) is a rare example of a business whose origins lie in a failed railroad venture but has evolved into one of the most quietly powerful landowners in America. Born from millions of acres granted for a railway that never materialized, TPL inherited vast West Texas land at virtually zero cost. Initially overlooked as barren desert, this land's value has grown dramatically over time as the Permian Basin transformed into a global energy powerhouse.
From modest grazing leases, TPL now generates substantial royalties from hydrocarbon extraction and easement fees for pipelines and infrastructure, driving revenues from $28 million in 2016 to $373 million in 2024, a 38% CAGR. The company has also capitalized on the rise of fracking by establishing a new, rapidly growing revenue stream from sourced and produced water sales, which now represent over a third of total revenues and grow at around 44% annually.
Unlike capital-intensive peers, TPL operates with minimal costs, relying on royalty and easement income—earning what can be described as 'mailbox money.' This capital-light model allows cash flow to compound steadily, benefiting from what the author terms 'positive theta,' where value increases with time rather than decays. Market skeptics often misprice TPL by focusing on traditional metrics like P/E ratios without appreciating its unique growth driven by natural resource demand, infrastructure needs, and scarce groundwater rights. Positioned amid expanding energy and data center infrastructure, TPL's land ownership anchors its long-term growth potential, making it a compelling investment that thrives on time, scarcity, and simplicity. In essence, while many see a legacy oil company, TPL is emerging as a dominant water and infrastructure landowner in a vital and growing region.
Previously, we have covered TPL in December 2024 wherein we by Six Bravo on Substack. The author stated that Texas Pacific Land Corporation (NYSE: TPL) recently completed significant acreage acquisitions in the Permian Basin, adding assets with strong production and growth potential, expected to boost annual free cash flow by $45.5 million at $70 oil. Despite a 33% stock price decline following its S&P 500 inclusion, largely due to market volatility and lower oil prices, the company's thriving water segment and solid fundamentals made the dip a buying opportunity for long-term investors. Since our last coverage, the stock is up 0.38% as of 2nd June.
Texas Pacific Land Corporation (TPL) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held TPL at the end of the first quarter which was 28 in the previous quarter. While we acknowledge the risk and potential of TPL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.