Where Does DCP Midstream Stand Compared to Peers?



DCP Midstream’s enterprise value

DCP Midstream Partners (DPM) has an enterprise value of $5.2 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 the entire business. Equity value alone just gives the value to equity holders. EnLink Midstream Partners (ENLK) has the largest enterprise value of $6.8 billion among the selected peers.

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DCP Midstream’s EV-to-EBITDA multiple

Of the selected companies, DPM’s forward EV-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) multiple of 9.0x is above the group average of 8.5x. Crestwood Equity Partners (CEQP) has the lowest forward EV-to-EBITDA ratio of 7.8x.

DCP Midstream’s profitability margins

DCP Midstream Partners is the only company with a positive operating margin among the selected peers. This could be one of the reasons for its higher valuation multiple. DPM’s operating margin of 12.1% most likely reflects its cost saving initiatives.

DCP Midstream’s distribution yield

DCP Midstream Partners’ distribution yield of 9.1% is below the group average of 9.9%. However, the partnership’s distribution yield is quite high and might not be sustainable in the long run. Its high distribution yield likely indicates high riskiness and the high cost of equity capital. Crestwood Equity Partners has the highest distribution yield of 11.4%.

In the next part, we’ll analyze DCP Midstream’s exposure to commodity prices.


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