What WMB’s Current Valuation Tells Us


Dec. 4 2020, Updated 10:53 a.m. ET

WMB’s EV-to-EBITDA multiple

Williams Companies (WMB) was trading at an EV-to- EBITDA (enterprise value and earnings before interest, tax, depreciation, and amortization) multiple of 11.0x on November 15, 2017.

Peers ONEOK (OKE) and Enterprise Products Partners (EPD) were trading at multiples of 14.7x and 13.8x, respectively, while Kinder Morgan (KMI) was trading at a multiple of 10.8x as of the same date.

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WMB’s forward EV-to-EBITDA multiple

Williams Companies’ forward EV-to-EBITDA multiple was 10.5x on November 15, 2017. This is below its historical one-year, two-year, and five-year averages of 11.9x, 11.7x, and 13.2x, respectively, as well as below the peer median multiple of 12.6x.

WMB’s dividend yield

Williams Companies was trading at a dividend yield of 4.36% on November 15, 2017, which is above the one-year average of 3.7%. The C corporation expects to grow its dividend by 10% to 15% in 2018 and thereafter.

WMB’s undervaluation compared with the historical average and peers might indicate a buying opportunity, given its strong distribution growth guidance, reduced direct commodity price exposure, strong natural gas demand, focused expansion opportunities at Williams Partners (WPZ), and improved financial position. Moody’s recently changed its outlook on Williams Companies from “stable” to “positive.”

Analyst ratings for Williams Companies

Notably, 73.7% of analysts surveyed by Reuters recommend a “buy” for the WMB stock as of November 15, 2017, while the remaining 26.3% recommend a “hold.” Williams Partners has “buy” rating from 77.7% of the analysts.

WMB is currently trading below the low range ($29) of the analysts’ target price. WMB’s average target price of $34.2 implies a ~25% upside potential from its current price level.

For further coverage of midstream companies, check out Market Realist’s Master Limited Partnerships page.


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