In the previous part of this series, we compared Energy Transfer Partners’ (ETP) metrics to industry averages and averages of the broad market, as represented by the S&P500.
Here, we’ll compare Energy Transfer Partners to its closest peers individually. This should give you a better idea of where it stands in the industry based on various metrics.
Comparing Energy Transfer Partners to its peers
Firstly, in a sense, Kinder Morgan (KMI) shouldn’t be part of the list above. It consolidated its MLP subsidiaries into one C-corp in August 2014. Check out our coverage of the mega event. But, given that it’s the largest player in the midstream space with a market capitalization of ~$90 billion and an EV (enterprise value) of ~$140 billion, its presence here could be quite useful to provide context for the other midstream MLP players.
The largest pure MLP is, of course, Enterprise Product Partners (EPD), with an EV of ~$85 billion. But, in terms of (2013) revenues, Energy Transfer Partners and Plains All American Pipeline (PAA) come quite close.
In terms of assets, net debt, and operating cash flows too, KMI, EPD, and ETP stand out as leaders.
But, in terms of valuation, smaller players stand out. Kinder Morgan and Magellan Midstream Partners (MMP) stand out because they trade at EV/EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] multiples of ~20x.
On the other hand, the cheapest names in terms of EV/EBITDA are Energy Transfer Partners, followed by Plains All American Pipeline and Enbridge Energy Partners (EEP).
In terms of distribution yield—a metric widely used to value MLPs—Energy Transfer Partners, Buckeye Partners (BPL), and Markwest Energy Partners (MWE) seem attractive, with yields near 6%. Meanwhile, Kinder Morgan, Enterprise Product Partners, and Magellan Midstream trade at the richest valuations.
Indeed, MMP yields barely ~3% at current prices. Along with its elevated EV/EBITDA, this makes it one of the more expensive MLPs here.
On the other hand, Enbridge Energy Partners comes across as one of the cheaper names, with a distribution yield of ~5.5%.
All these companies, barring KMI, are holdings of the Alerian MLP ETF. Indeed, these six companies combined account for over half of the fund’s holdings. ETP alone accounts for just under 8%.