What Does Cheniere Energy’s Current Valuation Indicate?



Cheniere Energy’s valuation

So far in this series, we’ve discussed Cheniere Energy’s (LNG) recent market and financial performance. In this article, we’ll perform a valuation analysis of Cheniere Energy based on its historical and forward multiples.

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Cheniere Energy’s EV-to-sales multiple

Cheniere Energy was trading at an enterprise-value-to-sales multiple of 8.8x on December 15, 2017. On that date, Cheniere Energy’s forward EV-to-sales multiple, which is based on the next-12-month sales estimates, was 6.3x. Its forward EV-to-sales multiple is high compared to the peer median of 2.4x.

Cheniere Energy’s EV-to-EBITDA multiple

Cheniere Energy’s (LNG) forward EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] multiple of 18.6x is higher than the peer median of 12.2x. Based on the midpoint of its 2018 guidance, the company is currently trading at an EV-to-EBITDA multiple of 19.4x.

Cheniere Energy is trading at a price-to-distributable cash flow of 39.1x based on distributable cash flow guidance of $0.2 billion–$0.4 billion.

Cheniere Energy’s high relative valuation may not be justified considering the uncertainties in the global LNG market, high leverage, low operating cash flows, and buyers’ price pressure. Its high valuation could reflect its fixed stream of cash flow from LNG trains with 87% of total capacity tied to long-term contracts, first mover advantage, current government’s measures to drive US LNG exports, and other expansion opportunities.

In the next article, we’ll look into Cheniere Energy’s technical indicators.


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