Energy Transfer Partners’ Value Compared to Its Peers
EV-to-adjusted EBITDA multiple
Energy Transfer Partners’ (ETP) EV-to-adjusted EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) ratio, using a trailing 12-month adjusted EBITDA, is 10.1x. It’s below the peer average of 11.7x. Spectra Energy Partners (SEP), Enbridge Energy Partners (EEP), and Enterprise Product Partners (EPD) are among the MLPs that are trading at a higher multiple compared to Energy Transfer Partners.
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Energy Transfer Partners’ forward EV-EBITDA multiple, which is based on the next 12-month EBITDA estimate, is 4.7x. Its forward EV-to-EBITDA multiple is below the peer median of 11.8x.
Energy Transfer Partners’ low valuation relative to its peers might indicate a buying opportunity considering its strong presence in the prolific Permian Basin, strong future EBITDA growth, significant expansion opportunities, and expected synergies resulting from the simplification transaction. The partnership reiterated its merger synergies target of $200 million in the 1Q17 earnings call.
In contrast, Energy Transfer Partners’ low valuation might reflect its high commodity price exposure, declining natural gas transportation volumes, and high leverage. The partnership expects the leverage situation to improve significantly in the coming quarters.
In the next part, we’ll discuss Energy Transfer Partners’ commodity price exposure.