What Does Phillips 66 Partners’ Valuation Indicate?
According to its trailing-12-month EBITDA (earnings before interest, tax, depreciation, and amortization), Phillips 66 Partners (PSXP) is trading at an EV-to-EBITDA (enterprise value-to-EBITDA) of ~15.5x, higher than the average of ~14.0x for its selected peers.
PSXP’s multiple is higher than ~12x for Tesoro Logistics (TLLP). However, it’s close to ~15.4x for Valero Energy Partners (VLP).
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The above graph compares PSXP’s EV-to-EBITDA multiple with those of its selected peers.
Impact of general partner interests and IDRs
The EV-to-EBITDA ratio can be misleading when we try to understand limited partner unit valuation due to IDRs (incentive distribution rights). Read Do MLPs Benefit from the LP-GP Model? to learn more about IDRs.