Forward EV-to-EBITDA multiples
Kinder Morgan (KMI) is currently trading at a forward EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] multiple of nearly 11.4x. This is much lower than its five-year average multiple of nearly 17.4x.
In comparison, Enterprise Products Partners (EPD), Energy Transfer Equity (ETE), and Williams Companies (WMB) are currently trading at forward EV-to-EBITDA multiples of nearly 13.7x, 15.6x, and 11.8x, respectively.
As the above graph shows, the forward multiples of EPD, WMB, and KMI are lower compared to their respective five-year average multiples. This indicates possible undervaluation.
Energy Transfer Equity’s forward EV-to-EBITDA multiple, on the other hand, is higher than its five-year average multiple. ETE’s multiple is also higher compared to its peers. In the absence of superior risk-return metrics, ETE’s higher multiple may indicate a likely overvaluation.
In the final part of this series, we’ll take a look at what Wall Street analysts recommend for ETE, EPD, KMI, and WMB.