Forward EV-to-EBITDA multiple

The forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple is a useful metric used to value MLPs. A lower ratio usually indicates undervaluation.

The forward EV-to-EBITDA ratios for Hi-Crush Partners (HCLP) and Emerge Energy Services (EMES) are ~4.0x and ~5.0x, respectively.

HCLP, EMES: What Frac Sand MLP Valuations Indicate

As the above graph shows, both Hi-Crush Partners and Emerge Energy Services are trading at significantly lower EV-to-EBITDA multiples than their respective three-year average multiples. Fairmount Santrol Holdings (FMSA) and U.S. Silica Holdings (SLCA) are also trading at multiples lower than their historical averages.

EBITDA very small or negative

However, it should be noted that EBITDA values, especially in 2016, were very small or negative for both HCLP and EMES, resulting in too high or unmeaningful multiples. That significantly impacts the three-year averages. Still, the current multiples are lower than the levels in 2014 and 2015.

While the valuation looks attractive, it should be noted that both Hi-Crush Partners and Emerge Energy Services haven’t paid any distributions over the last two years. Their distribution yield thus stands at zero.

Let’s see what Wall Street analysts recommend for HCLP and EMES in the next and final part of this series.

Latest articles

On June 25, the soft economic data isn't an isolated case. We have been getting a flurry of dismal data points. The US economy added only 75,000 non-farm jobs in May.

French retail giant Carrefour has agreed to sell an 80% stake in its China operations for ~$705 million to Suning.com, an Alibaba (BABA) backed company. While China represents a massive opportunity with its almost 1.4 billion population, it has not been an easy market for foreign companies, at least when it comes to retail and e-commerce.

On June 25, US Secretary of Agriculture Sonny Perdue told CNN in an interview that the US-China trade war has impacted US farmers. He said that farmers “are one of the casualties” of the trade war.

25 Jun

Hang Seng and Nikkei 225 Lose amid Trade Worries

WRITTEN BY Mayur Sontakke, CFA, FRM

After rising marginally yesterday, Hong Kong’s Hang Seng Index fell today. The index lost 1.15% to end at 28,185.98. Only seven stocks in the index rose, while 39 declined. Four remained unchanged. Tencent Holdings (TCEHY) was one of the worst performers with a 1.8% fall.

Square (SQ) was absent from the list of the inaugural members of the Libra Association, the entity that will ensure that Facebook’s (FB) Libra cryptocurrency works as intended. Nearly 30 companies have joined the Libra Association.

Kroger (KR) stock fell 2.2% on June 20—the day the company announced its results for the first quarter, which ended on May 25. The negative sentiment for the stock continued.

172.31.38.64