So far, we’ve looked at Energy Transfer Partners’ (ETP) metrics in isolation over the years. Now, let’s find out where it stands when compared to its closest peers in the industry.
Revenue and earnings growth
In terms of earnings and revenue growth—adjusting for extraordinary items—Energy Transfer Partners seems to be quite close to its peers. But compared to the broad market, we see it does far better. ETP’s five-year average acquisitions-fueled revenue growth is particularly impressive.
In terms of profitability overall, Energy Transfer Partners lags behind its closest peers and the broad market. This is mainly because of the low-margin acquisitions it made recently. Indeed, its peers lag the broad market too, but that’s because of the low-margin tolling business model that these MLPs operate in.
In terms of its debt ratios, Energy Transfer Partners again stands close to its peers. The MLP sector here too—not surprisingly, as we discussed earlier—operates at completely different (higher-debt) levels compared to the broad market.
Finally, in terms of valuation—barring the PE (price-to-earnings) ratio, which is not as important for MLPs—Energy Transfer Partners stands out for trading at a discount to its peers and very close to the broad market.
For example, while ETP recently traded at an EV/EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] of close to 13x—before falling closer to ~10x since its announcement to acquire Regency Energy Partners (RGP)—Enterprise Product Partners (EPD) trades at an EV/EBITDA of ~17x. Smaller peers Magellan Midstream Partners (MMP) and Buckeye Partners (BPL) trade at EV/EBITDA ratios of ~20x and ~16x, respectively.
While this could be a consequence of the company’s weak profitability margins, given future growth prospects, ETP could actually be cheap at these levels.
All of these MLPs are members of the Alerian MLP ETF (AMLP), with ETP alone accounting for just under 8% of the fund.