Comparing Phillips 66 Partners to its rivals
How Phillips 66 Partners ranks
All of these companies are components of the Alerian MLP ETF (AMLP).
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As the above chart shows, EQT Midstream is the largest company in terms of market capitalization, while NuStar has the largest enterprise value, or EV.
Enterprise value ratio
EV is the approximate summation of a company’s equity value and net debt.
Of its peers, NuStar has the lowest EV/EBITDA (earnings before interest, taxes, depreciation, and amortization) multiple, 13.4x. PSXP has the highest EV/EBITDA multiple in the group, 37.8x.
Forward EV/EBITDA is a useful metric for gauging relative valuation. A lower forward multiple usually indicates expectations of EBITDA growth for the period.
Analysts’ consensus forward EV/EBITDA doesn’t change as significantly for NuStar as it does for PSXP or the others. This means analysts expect little increase in NuStar’s EBITDA.
PSXP shows the steepest fall in its EV/EBITDA, indicating strong expectations that its EBITDA will grow more than that of its rivals.
Distribution yield is equal to the cash distribution per unit divided by the unit price. The ratio is annualized and expressed as a percentage. All else being equal, as distributions grow, the value of the underlying unit also increases.
PSXP has a 1.32% distribution yield, the lowest in the group. DCP Midstream’s distribution yield is 7.86%, the highest. NuStar closely follows with a yield of 7.8%.
PSXP’s yield strong growth prospects are reflected in its current premium valuation.