EQT Midstream Partners (EQM) has higher market cap compared to Boardwalk Pipeline Partners (BWP). However, Boardwalk Pipeline Partners has a higher enterprise value because of higher outstanding debt. The enterprise value—approximately equal to market equity value plus the net debt (debt less cash)—is an important metric for the valuation of the entire business. Equity value alone just gives the value to equity holders.
The forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple is a useful metric to look at relative valuation. EQT Midstream’s forward EV-to-EBITDA multiple of 11.3x is lower than the peer average of 11.9x. Antero Midstream Partners (AM) has the highest forward EV-to-EBITDA multiple of 14.3x among the selected peers.
On the other hand, Boardwalk Pipeline Partners’ has the lowest forward EV-to-EBITDA of 10.2x. Its valuation might stay low until its leverage position is improved and distribution growth is resumed.
Boardwalk Pipeline Partners has the highest net debt-to-EBITDA multiple among the selected peers. EQT Midstream’s leverage of 1.3x is the lowest among the selected peer group. A leverage multiple of 1.3x is considered very good in the current energy price environment. MLPs usually target a ratio below 4.0x–4.5x.
Boardwalk Pipeline’s distribution yield of 2.2% is the lowest among the selected peers. Its low distribution yield reflects its low distributions. Boardwalk Pipeline’s peers such as DCP Midstream Partners (DPM) and Williams Partners (WPZ) are currently trading at high distribution yields of 8.5% and 9.9%.