Kinder Morgan’s Valuation: Is It Attractive?

By

Updated

Discount compared to historical valuation

Currently, Kinder Morgan (KMI) is trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of nearly 12x—lower compared to its five-year average multiple of ~17x.

Article continues below advertisement

Discount relative to peers

Kinder Morgan’s forward EV-to-EBITDA is also lower compared to nearly 14x for both Enterprise Products Partners (EPD) and Plains All American Pipeline (PAA). However, it’s comparable to ONEOK’s (OKE) multiple.

The above graph compares KinderMorgan’s forward EV-to-EBITDA multiple with selected peers. So, KinderMorgan seems to be trading at a discount compared to its own historical valuation as well as relative to its peers.

Kinder Morgan’s yield

Kinder Morgan’s yield of 2.4% is lower compared to nearly 6% for Enterprise Products Partners, 4.5% for Magellan Midstream Partners (MMP), and 6% for Energy Transfer Equity (ETE).

In comparison, the Alerian MLP ETF (AMLP) is trading at a yield higher than 7%, while the SPDR S&P 500 ETF (SPY) yields nearly 2%. The energy sector forms nearly 6.6% of the S&P 500 Index (SPX-INDEX).

To learn more about Kinder Morgan’s 1Q17 performance, read Kinder Morgan’s 1Q17 Net Income Falls 9%, Misses Estimates.

Advertisement

More From Market Realist