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Where Does NGL Energy Stand Compared with Its Peers?

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Jul. 7 2016, Updated 6:06 a.m. ET

NGL’s enterprise value

NGL Energy Partners (NGL) has an enterprise value of $5.0 billion. The enterprise value—approximately equal to market equity value plus the net debt (debt less cash)—is an important metric for the valuation of an entire business. Equity value alone just gives the value to equity holders. Among the peers selected for this analysis, Sunoco Logistics Partners (SXL) has the largest enterprise value of $14.4 billion. Energy Transfer Partners (ETP) holds the general partner of SXL.

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NGL’s EV-to-EBITDA multiple

Of the selected companies, NGL’s forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 10.3x is below the group average of 11.3x. At the same time, Buckeye Partners (BPL) has the highest forward EV-to-EBITDA of 13.5x.

NGL’s profitability margins

The partnership has the lowest profitability margins among the selected peer group. NGL’s low operating margin reflects its involvement in the commodity acquisition and marketing businesses, which generally have low margins. With 20.1%, Buckeye Partners (BPL) has the highest operating margin in the peer group. NGL Energy Partners has a negative ROE (return on equity) while AmeriGas Partners (APU) has the highest ROE of 15.7%. AmeriGas Partners is the largest US propane marketer.

NGL’s distribution yield

NGL Energy’s distribution yield of 8.1% is higher than the group average of 7.8%, despite a recent distribution cut. NGL’s high distribution yield could be attributed to its high leverage and high commodity price exposure. A high distribution yield indicates a high risk and cost of equity capital. Sunoco Logistics Partners’ distribution yield of 7.0% is the lowest among the selected peers.

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