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How Does Targa Resources’ Valuation Compare with Peers?

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EV-to-EBITDA ratio

Targa Resources (TRGP) is trading at an EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of nearly 15x. This is higher than the peer average of nearly 14.2x. Peers included in the average calculation include Enterprise Products Partners (EPD), MPLX (MPLX), Shell Midstream Partners (SHLX), Phillips 66 Partners (PSXP), TC PipeLines (TCP), and Valero Energy Partners (VLP).

The graph above compares TRGP’s EV-to-EBITDA with selected peers.

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Impact of general partner interests and IDRs

The EV-to-EBITDA ratio can be misleading when trying to understand limited partner unit valuation due to IDRs (incentive distribution rights). To learn more about IDRs, read The Importance of Incentive Distribution Rights for MLPs.

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