How Enbridge Energy Partners’ Valuation Compares to Its Peers’

Enbridge Energy Partners’ (EEP) forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 10.7x is slightly lower than its three-year historical average of 11.0x.

The enterprise value of a company is roughly the market value of its debt and equity less its cash holdings. The EV-to-EBITDA multiple is neutral to capital structure, as it takes into account a company’s debt and equity. A lower multiple could indicate an undervaluation.

Enbridge Energy Partners’ forward EV-to-EBITDA multiple is also lower than its trailing-12-month EV-to-EBITDA multiple of 12.4x, indicating expectations of EBITDA growth throughout the rest of 2016.

In this article, we’ll compare Enbridge Energy Partners’ EV-to-EBITDA multiples with those of its peers Plains All American Pipeline (PAA), ONEOK Partners (OKS), and Williams Partners (WPZ). The graph above shows the forward and trailing-12-month EV-to-EBITDA multiples of EEP and its peers.

EEP is trading at a trailing-12-month EV-to-EBITDA multiple of 12.4x. The trailing EV-to-EBITDA multiples of Plains All American Pipeline, ONEOK Partners, and Williams Partners are 14.4x, 11.4x, and 12x, respectively. EEP’s EV-to-EBITDA multiple is close to its peers’ trailing EV-to-EBITDA average of 12.6x.

EEP is trading at a forward EV-to-EBITDA multiple of 10.7x. Plains All American Pipeline, ONEOK Partners, and Williams Partners are trading at forward EV-to-EBITDA multiples of 10.1x, 9.7x, and 9.4x, respectively. EEP’s forward EV-to-EBITDA multiple is higher than its peers’ average forward EV-to-EBITDA multiple of 9.7x.

Enbridge Energy Partners’ forward EV-to-EBITDA multiple implies a valuation premium that’s likely the result of lower risk and superior return metrics.