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Williams Companies stock has delivered a very strong 5 year return, yet its current valuation checks lean expensive and suggest the shares are not an obvious bargain at today's price.

• Over the past 5 years, Williams Companies has returned roughly 2.9x, which puts extra focus on whether recent gains already reflect most of the good news in the story.

• The planned acquisition of Momentum Midstream for up to US$5.5b can support long term earnings and cash flow expectations. However, the size of the deal also brings integration and balance sheet risks that matter for how much investors are willing to pay for the stock.

• With a low value score of 2 out of 6 , Williams Companies currently looks priced on the richer side rather than as a clear value opportunity.

The issue now is whether Williams Companies' current share price still offers enough upside potential to justify that richer valuation.

Find out why Williams Companies' 31.4% return over the last year is lagging behind its peers.

Is Williams Companies Getting Expensive on Earnings?

The P/E ratio is a useful way to judge what you are paying for each dollar of Williams Companies earnings today. It links the share price directly to the company's reported profitability.

Williams Companies currently trades on a P/E of about 29.4x. This is materially higher than the wider Oil and Gas industry average of roughly 12.5x and also above the peer group average near 15.2x. The stock also sits above a modelled fair P/E of about 26.5x, which reflects what investors might typically pay given its size, margins and risk profile.

Despite the planned US$5.5b Momentum Midstream acquisition, which gives Williams Companies a larger gas infrastructure footprint, the current P/E already embeds a premium against both sector and peer benchmarks. The gap between the market multiple and the fair ratio suggests investors are paying up for the stock on earnings.

On the P/E metric, Williams Companies stock currently screens as overvalued compared with both its industry and a tailored fair multiple.

See what the numbers say about this price — find out in our valuation breakdown.

The Williams Companies Narrative: What Would Justify Today's Price?

Simply Wall St Narratives for Williams Companies give you a clearer link between today's valuation puzzle and the assumptions that would need to hold for Williams Companies' stock to be worth materially more or less than its current price. They sit on the company's Community page. Each one connects a specific number to a concrete view on how Williams Companies' growth, margins and risks could evolve, which you can revisit as new information comes through.