FLEX LNG vs. Targa Resources: Which Midstream Energy Stock Is a Better Buy in 2026?

The natural gas market has been transformed in recent decades from fracking and transportation advances, which have made natural gas far more of a global energy source. FLEX LNG (NYSE:FLNG) and Targa Resources (NYSE:TRGP) offer distinct ways to play the natural gas market. Which is the better buy today?

FLEX LNG focuses on the global ocean transport of deeply cooled natural gas, while Targa Resources provides the essential pipes and processing plants on American soil. Both companies benefit from rising export demand, but they operate at very different scales. This comparison of their financials and risks helps determine which stock fits your strategy.

The case for FLEX LNG

FLEX LNG operates as a pure-play shipping company specializing in the ocean transport of liquefied natural gas using a fleet of 13 carriers. These vessels provide the vital link between gas producers and global consumers by delivering massive loads of around 174,000 cubic meters of LNG, enough to power 45,000 homes for a year. Its standardized, modern fleet helps the company maintain a competitive edge over older, less efficient ships while ensuring reliable delivery for its customers.

In FY 2025, revenue reached nearly $335.3 million, a decrease of about $17 million from the prior year. The company reported net income of roughly $74.8 million, a 36% decline from 2024.

As of its December 2025 balance sheet, the debt-to-equity ratio was nearly 2.6x, indicating a reliance on borrowed funds. The current ratio, which measures the ability to pay short-term obligations using current assets, was a robust 3.0x. Free cash flow, calculated as cash from operations minus capital expenditures, was approximately $134.9 million and supports the ongoing maintenance of its modern vessel fleet.

The case for Targa Resources

Targa Resources operates a vast network of midstream infrastructure across several major U.S. shale plays, including the Permian Basin and the Bakken. The company gathers, processes, and transports natural gas to domestic and international markets, making it a critical part of the natural gas market. This integrated model uses thousands of employees to manage extensive physical assets that connect American energy production to Gulf Coast export channels.

For FY 2025, revenue was nearly $17.1 billion, reflecting a year-over-year growth rate of approximately 3.1%. Net income for the period was close to $1.85 billion, which achieved a net margin of roughly 10.8%. This margin represents the percentage of revenue retained as profit and reflects the high costs of operating massive physical pipelines and processing plants.

According to its December 2025 balance sheet, the debt-to-equity ratio was approximately 5.7x, indicating that total debt is more than five times the value of shareholder equity. The current ratio of 0.7x indicates that short-term liabilities exceed current assets, while free cash flow reached roughly $584.1 million. This cash flow figure, which is derived by subtracting capital expenditures from operating cash flow, provides the company with liquidity for its operations.

Risk profile comparison

FLEX LNG faces risks primarily tied to the volatility of global shipping rates and fleet utilization, which can decline if vessel supply exceeds demand. Any disruption in international trade routes or geopolitical tensions near major ports could impact its operations and revenue generation. The company is also subject to environmental regulations that could eventually force expensive upgrades to its carriers to meet new standards.

Targa Resources is sensitive to commodity price volatility and faces competition from large rivals like Enterprise Products Partners (NYSE:EPD) and Kinder Morgan Partners (NYSE:KMI). Operational hazards, such as pipeline leaks, cyberattacks, and evolving climate regulations, also pose significant financial risks to its daily operations. Additionally, the company relies on third-party storage infrastructure, and any lack of access to these facilities could adversely impact its bottom line.

Valuation comparison

FLEX LNG appears cheaper on a Forward P/E basis, while Targa Resources offers a more attractive P/S ratio based on its total sales volume.

Sector benchmark uses the SPDR XLE sector ETF.
Valuation metrics sourced from Financial Modeling Prep (FMP) and may differ from other data providers.

Which stock would I buy in 2026?

One of the great appeals of midstream oil and gas stocks is that they are more insulated from the volatility of energy prices than other parts of the energy system, such as wildcatters, refiners, and retailers.

Targa Resources is a more traditional midstream infrastructure play, as one of the largest independent gathering and distribution pipeline systems in the U.S. In particular, Targa is the largest pipeline operator in the Permian Basin and can transport natural gas from that region and other producing areas, such as the Bakken, to key distribution centers along the Gulf Coast.

For fiscal year 2026, the company is expected to see a robust increase in revenue of around 18%, to more than $20 billion, with improved net income of $2.58 billion, up around $250 million. The war in the Middle East, which has driven up global energy prices and disrupted supply, is a tailwind for demand, which the company is meeting with the opening of two additional processing hubs this year.

FLEX LNG is an intriguing story: the expansion of U.S. natural gas production and the increase in long-haul global LNG shipments, driven by supply changes from the Iran War and other macro factors, should benefit FLEX. But the fact of the matter is, there are too many LNG tankers coming into the market right now to generate a meaningful bump in near-term spot rates for the handful of ships FLEX is marketing (the bulk of the fleet is tied to long-term delivery contracts). Long-term, the structural shift in European demand away from Russia and toward the U.S. is something to watch for FLEX LNG, but for investors seeking a natural gas stock benefiting from today’s market conditions. Targa Resources is the choice.

Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Kinder Morgan. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.